Flip It to Fix It: An Immediate, Fair Solution to State Budget Shortfalls

Contact:

• David Blatt, dblatt@okpolicy.org, (918) 794-3944
• Shannon Moriarty, smoriarty@faireconomy.org, (617) 824-0069

United for a Fair Economy Releases Flip It to Fix It: An Immediate, Fair Solution to State Budget Shortfalls, Documents Current Regressive State Tax Structures
 
A new study has found that inverting state tax structures—whereby the highest income earners would be taxed at the current percentage of income for the lowest income earners, and vice versa—would raise more than $4 billion in new revenue for Oklahoma (a 35 percent increase), immediately eliminating state budget shortfalls and avoiding the serious consequences of budget cuts.
 
The report, titled “Flip It to Fix It: An Immediate, Fair Solution to State Budget Shortfalls” was released today by Boston-based United for a Fair Economy and 13 state organizations around the country. “Flip It to Fix It” attributes a large part of states’ current deficits to the regressive tax structures that the report shows are designed to fail.
 
“Trying to raise adequate revenue through a regressive tax structure—where a greater percent of income is demanded of the poor than the well-off—is like trying to squeeze water from a stone,” said Karen Kraut, coordinator of state tax policy at United for a Fair Economy and co-author of the report. “The inadequacy of regressive tax structures puts everything we value at risk: the well-being of families, the future competitiveness of the American workforce, and the nation’s ability to rebound from the recession and prosper.”.

In 2007, the poorest 20 percent of Oklahoma households paid 9.9 percent of their income in sales, property, and income taxes, which is more than twice as much as the 4.8 percent of income paid by the wealthiest 1 percent (according to the Institute on Taxation and Economic Policy report, “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States“).
 
The cut to the top income tax rate set to go into effect next year will worsen the disparity, as the wealthiest 20 percent of Oklahomans will take home nearly three-fourths of the tax cut while the bottom 60 percent of Oklahomans together receive only 9 percent of the benefit.
 
“By taking so much revenue away with this tax cut and giving the benefits to a relatively small group, the state will be shifting a larger proportion of the cost of providing services onto lower- and middle-income Oklahomans,” said David Blatt, Director of the Oklahoma Policy Institute. “If we instead enacted a more progressive tax structure, we could restore badly needed funding to our schools and other state services while reducing or keeping taxes the same for the bottom 60 percent of Oklahomans.”
 
The report contends that inverting the current tax structure not only solves budget crises, but increases equity and best spurs steady and strong economic activity. It calls on states to adopt progressive tax reforms, many of which are immediately achievable and will help solve state deficits.

KEY FINDINGS:

• Every state has a regressive tax structure that would benefit significantly from a direct inversion into a progressive structure.

• An inverted tax structure for every state would raise a combined $490 billion in new revenue, immediately eliminating state budget deficits.

• A cuts-only approach to state budget deficits is shortsighted—imposing immediate harm on families, while dampening economic recovery and compromising the future competitiveness of the American workforce. 

• A progressive tax structure provides commonsense equity, economic efficiency, and adequate revenue to invest in communities and spur economic growth.

• To achieve an inverted, progressive structure, states must establish or improve upon the graduated personal income tax while reducing reliance at the state and local level on regressive sales, property, and excise taxes.

The full report and state-by-state information is now available at http://www.faireconomy.org/flipitreport. 
 
To schedule an interview with the authors of the study and/or representatives from state organizations, please contact Shannon Moriarty atsmoriarty@faireconomy.orgor (617) 824-0069. Video statements are also available at http://www.faireconomy.org/flipitreport.
 
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Oklahoma Policy Institute (OK Policy) provides timely and credible information, analysis and commentary on policy issues affecting Oklahoma. OK Policy is a partner of United for a Fair Economy through its program, the Tax Fairness Organizing Collaborative, a network of statewide organizations in 24 states working to reduce economic inequality through progressive tax reform. More at www.okpolicy.org.
 
United for a Fair Economyis a national, independent, nonpartisan, 501(c)(3) non-profit organization located in Boston, MA, which works to rein in economic inequality and promote a more broadly shared prosperity. More at www.faireconomy.org.