This afternoon, the Senate Task Force on Comprehensive Tax Reform released its final report. The most significant recommendation is to make further cuts to the top rate and replace that revenue by ending numerous tax credits. Almost two-thirds of the tax benefits targeted for elimination do not go to special interests or favored industries, but to hundreds of thousands of taxpayers below a certain income level in order to offset regressive sales and property taxes. They would also end the personal exemption, which reduces the tax liability for every household in Oklahoma.

This proposal is a bad deal for hardworking Oklahomans. Doing away with broad-based tax benefits like the personal exemption, earned income tax credit, and sales tax relief credit in exchange for a cut in the top income tax rate would actually increase taxes for a majority of Oklahomans. This would hit hardest the poor and middle class families who are struggling most to make ends meet in a tough economy. Read the rest of this entry »

Earlier this year, we called attention to one of the stranger loopholes in the Oklahoma tax code, the case of the “double deduction” of state income taxes.  Federal tax law allows taxpayers who itemize their deductions to claim a deduction for state income tax, along with such expenses as home mortgage interest payments, charitable contributions, local property taxes and extraordinary medical expenses. While Oklahoma is among 31 states that allow taxpayers to itemize their deductions on their state income tax return as well, only in Oklahoma and five other states are taxpayers allowed to claim a deduction for state income taxes on their state tax return. In the context of the state’s huge revenue shortfalls and painful budget cuts, we urged the Legislature to follow New Mexico’s lead in taking action to disallow this deduction, which, according to estimates provided us by the Institute on Taxation and Economic Policy (ITEP), would generate $118 million in additional revenue. Since only a minority of mostly wealthier taxpayers itemize their deduction, eliminating the deduction for state income taxes would also help address the inequities of our tax system, where low- and middle-income Oklahomans pay more of  their income in state and local taxes than do the wealthy. This proposal generated some interest but did not make its way into the final FY ’11 budget agreement.

ITEP is now out with a new report that provides a critical look at the subject of itemized deductions more broadly. Their basic argument is that itemized deductions  are an extremely regressive component of tax systems:

Itemized deductions impact tax fairness: low-income families receive virtually no benefit from these deductions, and the biggest benefits are reserved for the upper-income families who arguably need them the least Read the rest of this entry »

An interesting new report from our friends at the Center on Budget and Policy Priorities looks at whether families with income below the federal poverty level (FPL) in each state are subject to state income taxes. It finds that for Oklahoma, the threshold at which a two-parent family with two children owes state income tax made it above the federal poverty line for the first time in 2008. The income tax threshold for a two-parent family of four was $23,500 in 2008, which is 107 percent of the FPL of $22,017. The report shows that back in 2000, the state’s income tax threshold for a family of four was several thousand dollars below the poverty line. Read the rest of this entry »

Today we released our long-awaited Online Budget Guide, a comprehensive resource exploring how Oklahoma’s state and local government collect and spend money to provide public services. While the Guide is packed full of facts and figures and works as both an introduction for citizens and students and a quick-reference for legislators, public managers, advocates, and reporters, it is about more than basic information. It’s also about some basic concerns we want to share with our fellow Oklahomans. Matt Guillory, OK Policy’s Executive Director, said: Read the rest of this entry »