Claims for Oklahoma tax cut not OK

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.

ABOUT THE AUTHOR

David Blatt helped found OK Policy in 2008 and became the organization's Executive Director in 2010. David previously served as Director of Public Policy for Community Action Project of Tulsa County and as a budget analyst for the Oklahoma State Senate. He has a Ph.D. in political science from Cornell University and a B.A. from the University of Alberta. David has been selected as Political Scientist of the Year by the Oklahoma Political Science Association, Local Social Justice Champion by the Dan Allen Center for Social Justice, and Public Citizen of the Year by the National Association of Social Workers. He lives in Tulsa with his wife, Patty Hipsher, a special education teacher in Broken Arrow, and their son, Noah.

2 thoughts on “Claims for Oklahoma tax cut not OK

  1. ” many of Oklahoma’s leading economists” Almost all of whom either work for the state government or teach at public institutions therefore having a vested interest in the reduction in revenue from the individual tax payer. David, your point is not only unclear, it is biased and quite frankly wrong. It is a fact that states with lower or no income tax have better economies than those with higher tax rates. You can’t argue the facts sir. You can speak to conjecture and philandering by a biased group of “economists” but that argument becomes illogical and irrelavent due to its source.

  2. Frank, I’d be happy to respond to your data proving that states with no income tax have stronger economies – if you’d provided any. That argument has been utterly demolished by ITEP at http://www.itepnet.org/pdf/junkeconomics.pdf as well as OCU’s Jontahan Willner at: http://dl.dropbox.com/u/19732897/Willner-PuttingRealEconomics_into_an_Economic_Assessment_of_the_OklahomaIncomeTax.pdf As to your claim that the views of an academic are inherently biased because they work for a public institution – go find out who funded the so-called Laffer report making these debunked claims about the income tax, and then let’s talk about bias

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.