On April 5th, Oklahoma Policy Institute is hosting a forum, “Eliminating the Income Tax: Silver Bullet or Fool’s Gold,” from 1:30 to 3:30 pm at the Oklahoma History Center in Oklahoma City. Several of Oklahoma’s most respected economists and economic developers will discuss the methodology and conclusion of the report from Arthur Laffer and his colleagues that has formed the basis for proposals being considered by the Oklahoma legislature to do away with the state income tax. They will also focus on what the implications of doing away with the income tax could be on Oklahoma’s public finances, economic development, and the overall state economy.

Participating in the forum will be: Read the rest of this entry »

This week marks two years since landmark health care reform legislation, the Affordable Care Act (ACA), was signed into law.  While some of the law’s major provisions have yet to take effect, many of the rule-changes and programs that have been rolled out over the last two years are beginning to have an impact in Oklahoma.  Individuals buying insurance in the private market, families obtaining coverage through their employer, and seniors who rely on Medicare have all seen their costs go down and the quality of their benefits improve.  This post catalogs some of the ways Oklahomans have benefited under the Affordable Care Act: Read the rest of this entry »

As Oklahoma’s tax debate unfolds, it has been encouraging to hear a rising chorus of influential voices insist that any tax plan must be revenue neutral. Given deep cuts that state agencies have absorbed in recent years and the long-term fiscal challenges the state faces in the years ahead, eroding our revenue base with one-sided  tax cuts would be hugely irresponsible and fiscally unsustainable. One promising approach to ensure that we do not bankrupt the state is for Oklahoma to adopt a pay-as-you-go, or PAYGO, requirement.

State Treasurer Ken Miller recently stated:

Budget writers should adopt a “pay-as-we-go” approach to reducing taxes. To responsibly finance tax cuts, policymakers should eliminate one dollar of spending or credits for every dollar cut in taxes.

This can be accomplished with fiscal discipline, better spending prioritization and a refined approach to budgeting.

Miller’s call for a pay-as-you-go approach was quickly endorsed by both the Oklahoman and Tulsa World. Read the rest of this entry »

The United States Supreme Court is gearing up for oral argument in what is sure to be a landmark case in American history – the multi-state challenge to the Affordable Care Act, the federal health reform law passed by Congress in 2009.  The court has scheduled an unprecedented six hours for oral argument over three days, the most time allocated to a single case since the 1960s.  Oral argument is the only interactive portion of the Court’s decision-making process, where attorneys from both sides state their case and take questions from the justices.  This post breaks down the issues scheduled for debate and summarizes each side’s position.

Day 1: Monday March 26th, 2012

The first day of argument will focus on a procedural question: are the states even allowed to bring suit over a portion of the law that hasn’t yet been enacted?  An existing federal law, the Anti-Injunction Act, prohibits challenging a tax prior to that tax being imposed.  Proponents of the Affordable Care Act argue that since the ‘individual mandate’ amounts to a tax that doesn’t take effect until 2014, this little-known law might actually pose a significant threat to the health law’s challengers.  As Stuart Taylor of the Brookings Institution wryly observes:

If the justices agree that the Anti-Injunction Act applies, this year’s case will be perhaps the greatest anticlimax in Supreme Court history. And, the justices’ assignment of a full hour of oral argument to this question suggests that some take this issue very seriously. Read the rest of this entry »

The push to eliminate Oklahoma’s personal income tax relies heavily for intellectual support on a study done for the Oklahoma Council of Public Affairs by economist Arthur Laffer and his colleagues at Aduin, Laffer & Moore econometrics. Last month we reported on a pair of studies from the Institute on Taxation and Economic Policy, a leading national tax policy think-tank, that revealed fundamental flaws with the Laffer/OCPA report.

Now three leading Oklahoma economists – Dr. Kent Olson, Professor of Economics Emeritus  at Oklahoma State University, Dr. Jonathan Willner, Professor and Chair of the Department of Economics and Finance at Oklahoma City University, and Dr. Cynthia Rogers, Associate Professor of Economics at University of Oklahoma -  have released their own reviews of the Laffer/OCPA report. Each has found serious errors and shortcomings in the OCPA/Laffer analysis and each cautions strongly against using it as the basis for public policy decisions.

Dr. Kent Olson, in a paper titled, “The Voodoo Economics of Phasing out Oklahoma’s Personal Income Tax,” focuses on a regression equation that yields Laffer’s predictions of spectacular economic growth rates from eliminating the income tax. Carefully replicating the data and assumptions built into Laffer’s equation, Olson uncovers multiple errors that lead to mistaken conclusions. Olson writes that the design of Laffer’s key equation and his use of data:

… produces biased and greatly exaggerated estimates of the effects on personal income and non-personal-income tax revenues from phasing out Oklahoma’s personal income tax. In this author’s view, it fails totally to provide adequate justification for such an important change in Oklahoma’s tax structure. Read the rest of this entry »

The share of income Oklahomans pay in state taxes has fallen to its lowest point in decades.  In 2010, Oklahomans paid just 5.5 percent of their total income in state taxes.  This includes sales tax, income tax, motor vehicle tax, excise taxes on oil and gas production, and all other state taxes. This is a major drop from the average of 6.9 percent over the past three decades, and it is well below the previous low of 6.1 percent in 1987 and 2009.

Source: U.S. Census Bureau - Tax Collections; Bureau of Economic Analysis - State Personal Income

As the graph shows, the share of income paid in taxes has been falling since 2006. In 2007 and 2008, collections grew but less rapidly than the state economy as the income tax cuts of the mid-2000s phased in. Once the state was hit by the recession in 2009, collections fell for two straight years, with 2010 collections coming in 15 percent below 2008.. During the same period, state personal income  contracted by 4 percent.

Even before the latest steep drop, Oklahoma was among the lowest tax states in the nation, ranking 40th in total state and local taxes as a share of personal income in 2009.  As we struggle through an incomplete recovery, and with tax cuts back on the front burner of the political agenda, the failure of our tax collections to keep pace with growing costs and growing needs raises critical questions of how we can meet the core responsibilities that Oklahomans expect from state government.

For the past 27 years, a statewide network of Area Health Education Centers (OKAHEC) has worked to increase the supply of primary care providers and improve access to health care in Oklahoma’s rural and underserved communities. Now this program is going away, another victim of the state fiscal crisis and of our failure to provide adequate funding of services that help make us a healthier, better educated, and more prosperous state.

OKAHEC is a community-state-federal partnership that was established in 1984 at the OSU College of Osteopathic Medicine. The program’s central office is part of the OSU Center for Rural Health and its regional centers are located at Cameron University in Lawton, Carl Albert College in Poteau, Tulsa Community College, and Rural Health Projects in Enid.  Nationally there are 56 AHEC programs with more than 235 centers operating in almost every state. Approximately 120 medical schools and 600 nursing and allied health schools work collaboratively with AHECs to improve health for underserved and under-represented populations.

OKAHEC is intended as a comprehensive health workforce development pipeline focused on growing and nurturing the pool of health professionals serving rural and underserved communities. The program has three principal components,  summarized as “get ‘em, train ‘em and keep ‘em”: Read the rest of this entry »

Following a year of open defiance and several months of interim study, the Oklahoma Legislature now appears poised to take action on a major requirement of the new federal health care law, the Affordable Care Act.  States are required by the law to have web-based health insurance marketplaces, known as exchanges, up and running by 2014.  If Oklahoma does not act to establish an exchange during this legislative session, the federal government will take over the process and establish and maintain an exchange on the state’s behalf.

Last week, legislation to establish an exchange authored by Senate President Pro Tem Brian Bingman was introduced and passed in the Senate Health and Human Services Committee.  SB 1629 creates the ‘Health Insurance Private Marketplace Network Trust’ and broadly outlines the rudimentary functions of a new ‘marketplace network’ – or, insurance exchange.  If this bill is intended to establish an exchange that will satisfy the requirements of the health law and preempt federal intervention, it seems they’ve missed the mark.

Exchanges are meant to serve as a one-stop shop for health insurance.  State-based exchanges should feature a web portal that enables simple and standardized plan comparisons, navigators to provide expert consumer assistance, and a 24-hour hotline.  Residents should be able to purchase insurance and apply their premium tax credits to the cost of a health plan with just a few clicks of the mouse.  If a household is eligible for Medicaid, the exchange should reroute them to apply for the program.  The ‘marketplace’ outlined in SB 1629 shirks almost all of these essential exchange functions. Read the rest of this entry »

Oklahoma Farm & Ranch Museum, Elk City

Could doing away with Oklahoma’s income tax shift taxes not only onto low and middle-income families but also from urban areas to rural areas? Many programs, services, and incentives important for rural Oklahoma rely on our existing revenue structure and the income tax in particular.  In addition, switching to more reliance on other taxes would especially hurt farmers and ranchers.

States without an income tax have to get resources somewhere to fund their core services.  As the chart below shows, the majority of those states look to the property tax to fill the gap.  Every one of the states without an income tax pay more in property taxes per capita than we do in Oklahoma. The average per capita property tax collections in no-income tax states, $1,507, is more than two-and-a-half times that of Oklahoma, $582. Read the rest of this entry »

A new study of state tax costs on business from the Tax Foundation ranks Oklahoma fifth best in the nation for new firms and 16th best for mature firms. Among states in the region, Oklahoma ranked second lowest in business tax costs for new firms and third for mature firms. While Texas ranked slightly ahead of Oklahoma for mature firms (12th versus 16th), the Lone Star state was determined to be 42nd best for new firms, well behind Oklahoma (5th).

The Tax Foundation report, titled “Location Matters: A Comparative Analysis of State Tax Costs on Business”, claims to be the first study of business taxes that provide comparisons of actual state tax burdens. Unlike other studies, the report is intended to “address the bottom line question asked by many business executives: “How much will our company pay in taxes?””

When looking at taxes paid by specific newly-established and mature industries, Oklahoma ranked among the ten lowest-cost states in six of 14 categories. The state’s ranking ranged from 3rd for new call centers, which are calculated to have a total effective tax rate of 3.9 percent, to 31st for the mature capital intensive manufacturing category, with a total effective tax rate of 13.4 percent.

These findings are particularly notable as proponents of cutting or eliminating Oklahoma’s income tax frequently cite a separate study from the Tax Foundation that ranks Oklahoma 33rd in business tax climate.  Whereas that study measures a state’s tax system in relation to the principles of a ‘model business tax structure’, this new study focuses on how much businesses actually pay in taxes. Read the rest of this entry »

John Thompson is a former Oklahoma historian and inner city teacher who is now an education writer focusing on inner city schools.

When Oklahoma’s No Child Left Behind (NCLB) waiver was granted, local news celebrated a new era of “freedom and autonomy,” apparently believing that standardized testing will become less ubiquitous. But the waiver does not mean that educators who are tired of standardizing testing should be smiling, or that we will begin “a whole new way of educating children”. Neither, however, does it mean that a right-wing conspiracy is poised to take over local schools.

Basically, the Obama Administration’s NCLB waivers were designed to relieve pressure to teach to the test for 90 percent of the nation’s schools, while doubling down on ‘bubble-in accountability’ for the most challenging 10 percent, and imposing new standards for evaluating teachers. It may or may not be possible, however, for a poor state like Oklahoma to successfully comply with the federal mandates. Read the rest of this entry »

The personal income tax is Oklahoma’s largest single revenue source. In 2011, the state collected $2.412 billion from the personal income tax, or slightly less than one in three dollars (31.7 percent) of total state tax collections. With a strong movement developing to substantially cut and ultimately eliminate the personal income tax, it is important to understand the vital role of the income tax in paying for a broad array of public services.

Income tax revenues are allocated in two ways: a set amount is taken off the top for a number of specific programs, and the rest is divided up by a formula. The programs funded off-the-top include:

• The ROADS fund: In 2012, the Department of Transportation received $255.7 million from the individual income tax for maintenance and construction of roads and bridges, along with small amounts for passenger rail services and public transportation. In 2013 and each year thereafter, the ROADS fund will receive an additional $41.7 million until the fund reaches an annual cap of $435 million. Governor Fallin has proposed increasing the ROADS allocation by $56.7 million annually and raising the cap to $550 million in order to repair the state’s bridges;
• Quality Jobs: Companies that qualify for the Quality Jobs program, the state’s marquis economic development program, receive quarterly incentive payments from personal income tax receipts. In 2011, Quality Job payments totaled $61.8 million.
• Oklahoma’s Promise scholarships:  In 2012, $63.2 million in personal income tax revenues was allocated for Oklahoma’s Promise scholarships, which cover higher education expenses for qualified Oklahoma students. Because of carryover in the program’s trust fund, this amount will decrease to $57 million in 2013. Read the rest of this entry »