Archive for 2013

Watch This: Debunking Myths About Who Pays Taxes

by | September 26th, 2013 | Posted in Blog, Watch This | Comments (0)

During the last presidential election, much was made of the fact that nearly half of Americans paid no federal income tax in 2010.  But is it true? A new 4 minute illustrated video from The Urban Institute explains who doesn’t pay income taxes and why. The video debunks the myth that large portions of the country ‘don’t pay taxes’.  Although some households don’t pay federal income taxes, all households inevitably pay other taxes (sales and property, payroll, and/or state income taxes).

Just 14 percent of all U.S. households pay neither income nor payroll taxes; that’s because most of those households are elderly and retired from working.  As we’ve blogged about previously, Oklahoma’s tax system ends up taking a much larger share from middle- and low-income families than it does from wealthy families, even as the state’s poorest households are exempt from federal income taxes.

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Who pays state and federal taxes in Oklahoma — in 2 charts

by | October 4th, 2012 | Posted in Blog, Taxes | Comments (5)

[Update: A previous version of chart #1 incorrectly said 2011. The chart is based on 2009/2010 American Community Survey data.]

1) 44 percent of Oklahomans owed no federal income tax in 2010. The vast majority were workers, elderly, disabled, or students.

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Quick Take: New fiscal year off to mixed start

by | August 16th, 2012 | Posted in Blog, Budget | Comments (0)

This week’s announcement of General Revenue (GR) collections for the first month of the new fiscal year (FY 2013) provided mixed news for both overall collections and the performance of particular major taxes.

  • Overall GR in July was $382.7 million. This is $6.4 million, or 1.7 percent, above last year. However, as the chart below shows, state revenues have yet to fully recover from the collapse that accompanied the last economic downturn. This year’s July collections remain 15 percent below four years ago and are still not back to where they were a full six years ago.

  • Most major taxes showed growth compared to last year, showing continued strength in the state economy. July sales tax collections were up 9 percent from last year and are 6.5 percent above their pre-downturn peak. By contrast, while income tax collections were up 20.7 percent from last year, FY 2013 income tax collections remain 20 percent below their peak in FY 2007. This reflects both the continuing impact of income tax cuts that have phased in over the past eight years and the allocation of an increasing share of income tax collections to the ROADS fund and other purposes.

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Post-session review: So whatever happened to…

by | June 18th, 2012 | Posted in Blog, OK Policy | Comments (0)

Of the 1,934 bills filed this past legislative session, only a small fraction of those saw any significant action by legislators.  Most bills are never heard by a committee, and almost all of them fall short of a hearing on the floor of either legislative chamber. This post reviews the bills from this session that OK Policy provided commentary and analysis on, some in-depth and some in passing, and reveals how far they made it through the legislative process.

As we previously noted, there were far fewer bills this session targeting immigrants than in previous legislatures.  HJR 1088, sponsored by Rep. Terrill would have denied bail to a person who has entered or remained in the country illegally. It was not heard in committee.  Another Terrill bill, HB 3014, was a draconian proposal to implement English-only restrictions. It was similarly denied a committee hearing.

Out of a wave of bills targeting the poor and people receiving public benefits, only a handful were successful.  HB 2388, a bill to drug test welfare recipients that we criticized early on, was substantially revised (for the better, for the most part) and eventually passed both chambers.

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Guest Blog (Ken Miller, PhD): Tax reform revisited

by | June 5th, 2012 | Posted in Blog, Taxes | Comments (2)

Ken Miller is the Oklahoma State Treasurer.  This post originally appeared as an article in the May Oklahoma Economic Report and is reprinted with permission. 

Oklahoma is doing more than fine with unemployment three percentage points below the national average, the third best job creation rate, and fourth highest growth in per capita income. Even so, we could better encourage entrepreneurial activity, productivity and growth by reforming our entire tax code. Unfortunately, some are singularly focused on the personal income tax.

A May 15 Wall Street Journal editorial lamented the Oklahoma Legislature’s recent failure to eliminate the state income tax, asking: “Do Republicans stand for economic growth and tax reform or not?” Tax reform should not be confused with simply eliminating the state’s largest revenue source on a wing and a prayer. Tax cut promises are easy to make when necessary cuts in spending and tax incentives are ignored. Financing tax cuts with assumed future growth revenue works well at the margins, not as well with incremental changes around the median, and not at all if current rates lie outside the prohibitive range, as demonstrated by the Laffer curve.

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STATEMENT: Failure of tax cuts is great outcome for Oklahoma

by | May 25th, 2012 | Posted in Blog, Taxes | Comments (1)

Oklahoma Policy Institute released the following statement in response to the announcement that there will be no tax cut this session:

The failure of every tax cut proposal that was debated this session is a victory for Oklahoma. The Legislature heeded Oklahomans from all walks of life who have spoken out against income tax cuts. After three straight years of budget cuts that have seriously weakened core services, Oklahomans have stated clearly that their top priorities are restoring funding for education, fixing the child welfare system, repairing our roads and bridges, and making other critical investments that will promote our prosperity and security. We have not made sufficient progress towards these goals, but preserving our largest revenue source leaves us in much better position to tackle our challenges in the years ahead.

The decision to reject tax cuts this year was especially responsible given the uncertainties in the energy industry and the broader state economy. We applaud those leaders who insisted that tax cuts must be paid for and who rejected efforts to tie the hands of future legislators with automatic triggers.

We know, however, that this is just a brief intermission in a long battle over the right tax policy for Oklahoma. Going forward, we must have a more honest and well-informed debate about what we expect from state government, how much our obligations will cost, and how we will pay for them. We need to look with renewed seriousness at our outdated tax system and do away with unnecessary tax preferences. And we must improve tax fairness and not allow middle- and low-income families to shoulder a larger share of the load.

Guest Blog (Steve Ellis): Income tax opponents offer nothing new in the Wall Street Journal

by | May 23rd, 2012 | Posted in Blog, Taxes | Comments (1)

Stephen Ellis, Ph.D., is Associate Professor in the Department of Philosophy at the University of Oklahoma. His research areas include philosophy of economics, decision theory, philosophy of mind and ethics.

The Oklahoma income tax ‘wars’ have gone national!  The latest salvo was fired last week by the Wall Street Journal in an editorial urging Oklahoma to enact major income tax cuts.  While the editorial offers nothing new (except for a high level of snark), it is worth noticing because it reveals the intellectual bankruptcy of the tax-cut case.

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Tax cut proposal Q & A

by | May 18th, 2012 | Posted in Blog, Taxes | Comments (3)

NOTE: This post has been updated as new information becomes available

Yesterday, the Governor and legislative leaders announced agreement on a ‘joint proposal for income tax reduction and tax code simplification’. (Click here for a summary and here for HB 3061 which contains the proposal).  Here are some questions and answers addressing the main aspects of the agreement: tax rates, offsets, fiscal impact and triggers. You can see our statement on the plan here.

Question #1: What are the changes in the income tax rates?

Answer: Personal income tax rates will change in two ways. First, the top rate will be lowered from 5.25 percent to 4.8 percent as of January 1, 2013. Second, the number of brackets is reduced. Currently, there are seven tax rates, ranging from 0.5 percent on the first $1,000 of taxable income for a single individual ($2,000 for a married couple) to 5.25 percent on taxable income above $8,700 ($15,000 for married couples) (see the current brackets here). The proposal will reduce this to three brackets: 1 percent on the first $2,500 of taxable income ($5,000 for married); 3.3 percent on income between $2,501 and $7,500 ($5,001 – $15,000 for married), and 4.8 percent on all income above that. If you make over $7,500 in taxable income  ($15,000 for married), you will be in the top income tax bracket, and your income above that amount will be taxed at the top rate.

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Claims for Oklahoma tax cut not OK

by | May 17th, 2012 | Posted in Blog, Taxes | Comments (2)

This post was written by Nick Johnson, Vice President for State Fiscal Policy with the Center on Budget and Policy Priorities. This originally appeared on the Center’s Off the Charts blog and is reposted with permission.

Yesterday’s Wall Street Journal editorial supporting a proposal by Oklahoma governor Mary Fallin to phase out the state’s income tax contains a slew of incorrect or misleading statements.  For instance:

    • The editorial wrongly asserts that states without income taxes have had stronger economic growth than other states, echoing a claim from a recent report from economist Arthur Laffer and the American Legislative Exchange Council.  As we have explained:

A key flaw in the Laffer analysis is that all of its measures of “economic growth” are really just measures of population growth.  As a state’s population grows, you would expect its total number of jobs and its total economic output to grow with it.  But, that’s not the same thing as a state’s per-capita performance.

A study from the Institute on Taxation and Economic Policy shows that residents of states with relatively high income tax rates are doing as well, if not better, than residents of states lacking a personal income tax in terms of per-capita economic output and household income.

      • The editorial claims that states with relatively high income tax rates have faced the biggest budget shortfalls.  That’s simply not true.  Four of the nine states without an income tax — Nevada, New Hampshire, Texas, and Washington — have closed (or are closing) above-average shortfalls for the upcoming fiscal year, while some of the high-income-tax states that the editorial mentions, like Illinois and Maryland, had below-average shortfalls.Also, the editorial’s boast that no-income-tax states “manage to balance their budget nearly every year” makes little sense, since all states except Vermont are required to balance their budgets.
      • The editorial cites Governor Fallin’s warning that Oklahoma is about to become an “income tax sandwich” as neighboring states consider eliminating their income taxes.  It’s true that anti-tax activists have been promoting income tax repeal in Kansas and Missouri for years.  But they haven’t succeeded.   In fact, Governor Fallin’s proposal would make Oklahoma the only state ever besides oil-rich Alaska to repeal its income tax.

The editorial correctly notes that many of Oklahoma’s leading economists have challenged claims that eliminating the income tax would help the economy.  But it wrongly suggests that non-economists feel differently.  A recent survey found that Oklahomans oppose the tax cut by a 42-35 percent margin, partly because they overwhelmingly view an educated, well-trained workforce as more important than low taxes — and a state that lacks income tax revenue will find it harder to find the resources to educate its own people.

Politicians make bad fortune-tellers

by | May 15th, 2012 | Posted in Blog, Taxes | Comments (0)

A key question in the income tax debate has been whether tax cut supporters were taking a “responsible” approach in their proposals. They have worked hard to convince Oklahomans that we can afford tax cuts without disrupting core services.

Revenue growth triggers are the latest gambit in this effort. Under triggers, automatic tax cuts would go into effect whenever revenues increase by a certain percentage. Supporters say that triggers promote fiscal responsibility because they prevent us from cutting taxes during a recession.

The word out of the Capitol is that Governor Fallin is pushing to include triggers in the final proposal that comes out of conference committee. Triggers were part of the Governor’s original plan, and they have been added by the Legislature to two other bills.

We previously discussed why triggers are bad policy in general. An examination of the specific language in these triggers reveals numerous ways that they would not protect us from cutting taxes when we cannot afford it.

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