For more information, contact Dave Hamby, Oklahoma Policy Institute, (918) 810-0182, firstname.lastname@example.org
– – –
During the past few decades, Oklahoma has become one of the nation’s most conservative states. We’ve basically turned our state into a laboratory for tax cuts. Oklahoma lawmakers have cut the state’s personal income tax nine times in the last 20 years. When adjusted for inflation and population growth, the current year state budget is 12% smaller than it was two decades ago.
Oklahoma also has the nation’s highest threshold for raising new revenue. As a result, Oklahoma lawmakers have voted to raise new revenue exactly once in the last three decades. So, against this backdrop, let’s take a look at what Oklahoma can expect during the special session scheduled for Monday and the regular session that starts the following week.
Some state leaders — especially our governor — are pushing for even more cuts to the personal income tax. The governor’s stated goal is to completely eliminate Oklahoma’s personal income tax
For Oklahoma, more tax cuts — especially the elimination of the personal income tax entirely — is a recipe for disaster.
The state released a budget stress test report last week showing Oklahoma is financially unprepared for anything more than a mild downturn. There also are warning signs on the horizon. For example, revenue from oil and gas — the state’s largest industry — was down 35% during the past year. This was more than a BILLION dollars not available for state revenue to address Oklahoma’s unmet needs.
For those pushing for more income tax cuts, they are selling a vision of putting money back into the pockets of Oklahomans. When you run the numbers, however, it’s obvious that the math isn’t mathing.
ITEP has calculated the impact of a quarter of a percent cut (0.25%) to Oklahoma’s personal income tax:
- The lowest-income Oklahomans would get back about $19 a year — which isn’t even a tank of gas.
- Middle-income Oklahomans would get about $92 a year back.
- The richest 1% of Oklahomans — however — would receive more than $2,600. This would buy them a round trip airline trip to Europe.
The bottom line? Cutting the personal income tax over promises but underdelivers for everyday Oklahomans who need it the most.
And if Oklahoma moves to eliminating the personal income tax completely? Oklahoma would have eliminated 1 out of every 3 dollars for last year’s General Revenue Fund. Eliminating the personal income tax would drastically worsen inequality. Without the personal income tax, the lowest-income Oklahoman taxpayers would face a state and local tax rate that is 300 percent higher than the top 1%.
Oklahoma’s tax cutting spree has done nothing to make the state’s tax policies more fair and equitable. Oklahoma was ranked as the nation’s 16th most regressive tax system in ITEP’s latest Who Pays? Report. The lowest-income Oklahoma residents pay almost twice as much as the top 1% when measured as a share of household income towards state and local taxes.
Oklahoma’s tax system is upside down. And further cuts to the personal income tax will make it even worse.
These cuts over the past 20 years have resulted in an on-going disinvestment in public services. Oklahoma ranks among the worst states in nearly every quality of life report. These metrics include: health, poverty, child hunger, education, and much more. It’s a longer list of unmet needs than we have time for in this call.
Decades of tax cuts have kept the state from investing billions of dollars annually into the shared services that could help improve those outcomes. This has been a giant missed opportunity to invest in the well-being of all Oklahomans. It doesn’t have to be this way.
Oklahomans are no strangers to hard times. We’ve lived through the Dust Bowl, as well as the boom and bust cycle of the petroleum industry. The decade prior to the pandemic was among the worst financially for our state and our fellow Oklahomans. We don’t want to go back to those days.
This is one of the key reasons that the Oklahoma Policy Institute is so focused on protecting existing revenue sources as we push for a comprehensive overhaul of the state’s tax system to ensure that everyone pays their fair share. This is how we set the stage for shared prosperity for all Oklahomans today – and tomorrow.