April 25th, 2017
The good news is that Oklahoma does have the resources to reinvest in our communities, but we need to make responsible policy choices to do so.
Perhaps because Oklahoma has relatively high poverty rates as a state, or perhaps because the state’s reputation has been influenced by The Grapes of Wrath’s portrayal of Oklahomans as impoverished refugees, we tend to think of ourselves as a poor state that can’t afford to make big public investments that could propel us forward.
That reputation is outdated. The 2016 rankings of per capita income by state put Oklahoma almost right in the middle of the nation at 28th.1 Our per capita income was 92 percent of the national average and ranked between Florida and Oregon — two states not known for being among the poorest in the nation. We have significantly higher per capita incomes than our neighbors in New Mexico and Arkansas.
So why haven’t we found the resources to invest in our communities? How do our poorer neighbors manage to provide higher teacher salaries and have better access to heath care?
The problem is that for years we’ve prioritized tax cuts benefiting a small number of people instead of investing in communities in ways that benefit all Oklahomans. Cuts to the top income tax rate have taken more than $1 billion annually out of schools, health care, public safety, and other services. Middle-income families are hurt by the loss of teachers, long waiting lists for services, and other cuts, but they aren’t seeing much benefit from the tax cuts. Only 10 percent of the tax savings went to the bottom 60 percent of earners — including all middle-income families and those who earn less.2
We’ve also allowed the tax code to become riddled with tax breaks and loopholes for special interests. Many of these tax breaks have been allowed to grow on auto-pilot through things like automatic tax cut triggers and off-the-top transfers. Between 2010 and 2014, tax breaks for big businesses in the state more than doubled at the same time as we were cutting services across state government.3 These tactics make it look like the money needed for our communities just isn’t there, but that’s a mirage.
We have solutions
The reality is that Oklahoma has sensible solutions to bring those revenues back to our communities. We can clean up the tax code and eliminate carve-outs for special interests. We can make a budget this year that makes no more cuts to schools, public safety, and other foundations of our communities.
Although lawmakers face a $748 million hole going into next year’s budget, we have options to fill that hole and find even more revenues to invest in long-neglected community needs. Our options include:
- End the capital gains tax break that allows wealthy owners of Oklahoma stocks and real estate to pay no income tax on their earnings [REVENUE: $105M];
- Stop out-of-state tax shelters by adopting combined corporate reporting [REVENUE: ~ $20M – $100M];
- End unnecessary sales tax exemptions for luxury purchases and purchases taxed in most other states [REVENUE: $112M – $290M];
- Modernize a gas tax that has not been adjusted for inflation in three decades [REVENUE: $135M – $220M];
- Increase the cigarette tax to fund important health services [REVENUE: $180M – $260M];
- End an expensive, unnecessary tax break for oil and gas production by restoring the historical 7 percent gross production tax rate [REVENUE: $470M]; and
- Restore 6 and 7 percent tax rates on very high incomes [REVENUE: $200M].
Together, these options total as much as $1.6 billion in new revenue, and they are not the only options that could be considered.4
The lessons of our history
We have seen clear examples in Oklahoma of how we can come together to develop public policy solutions to politically difficult problems. It requires those with power to show leadership by putting forward bold ideas and then taking the time to allow input and build consensus around them. It requires an active citizenry to keep pressure on lawmakers to see it through. And it requires the willingness to put Oklahomans first by taking advantage of all the resources available to invest in our communities — in federal, state, or local government and in the private sector.
When we do these things, we can overcome challenges even bigger than the budget crunch we face today. We have the resources and ideas to fix this. We can be a state that isn’t just trying to catch up with other states but takes the lead on having great schools, healthy citizens, good jobs, and strong communities.
Which path will we take: the path toward thriving communities across our state or the path toward declining quality of life? The lessons of our history tell us that we can choose the better path. Will we make that choice, or will we leave our children with less opportunities and less hope than we inherited from the generations before us?
- U.S. Bureau of Economic Analysis, March 2017, “State Personal Income, 2016,” https://www.bea.gov/newsreleases/regional/spi/2017/spi0317.htm
- David Blatt, January 2016, “The Cost of Tax Cuts in Oklahoma,” Oklahoma Policy Institute, https://okpolicy.org/the-cost-of-tax-cuts-in-oklahoma/
- Warren Vieth, November 2014, “State Business Tax Breaks More Than Double, to $760 Million,” Oklahoma Watch, http://oklahomawatch.org/2014/11/13/state-business-tax-breaks-more-than-double/
- To learn more about these options, see: Oklahoma Policy Institute, February 9, 2017, “2017 Policy Priority: Revenue options for a better budget,” https://okpolicy.org/2017-policy-priority-revenue-options-better-budget/. Oklahoma House Democrats have proposed a budget plan that includes $1.4 billion in revenue options, available at http://okdemocrats.org/release-house-democrats-propose-a-recurring-revenue-plan/. Governor Mary Fallin has proposed a budget that includes $1.5 billion in new recurring revenue, available at https://www.ok.gov/OSF/documents/bud18.pdf. A “Save Our State” coalition of non-profit, grassroots, and professional organizations, including OK Policy, has released a budget blueprint that includes $1.5 billion in new recurring revenue over the next three years, available at http://saveourstateok.org/.