OKPOLICY.ORG
By Mark Schlachtenhaufen
Low and middle-income Oklahomans pay more than two times more in taxes as a percentage of their income compared to the state’s wealthiest residents, a new study finds.
On Wednesday, the Institute on Taxation and Economic Policy and the Oklahoma Policy Institute released “Who Pays?” The study analyzed state tax systems and factors in all major state and local taxes including personal and corporate income taxes, property taxes, sales and other excise taxes.
In Oklahoma, the bottom 80 percent of taxpayers (households earning less than $89,000 a year) are paying between 8.6 percent and 10.5 percent of their incomes in state and local taxes, according to the study.
At the same time, the wealthiest 1 percent of households (those making above $418,000) pay just 4.3 percent.
Oklahoma’s tax system is regressive because families with lower incomes pay a larger percentage of those incomes in state and local taxes, the authors stated.
“This is in part because Oklahoma is one of very few states that does not exempt groceries from sales tax and does not index income tax brackets to inflation,” they stated.
The report also projects how Oklahomans’ overall taxes will change if all scheduled cuts to the top income tax rate go into effect.
“The Legislature and governor keep pushing tax cuts for top earners, but they haven’t done a thing for the Oklahomans who most need a break,” Perry said. “Meanwhile, many of these same low- and middle-income families have felt the worst effects of Oklahoma’s cuts to education and health care.”
Since 2002, Oklahoma’s top marginal individual income tax rate has fallen 22 percent — from 6.75 percent to 5.25 percent, according to the Oklahoma Council of Public Affairs. Based on 2012 Internal Revenue Service data, 85 percent of this pass-through income is claimed by taxpayers earning more than $100,000.
In Kansas, from 2012-14 the top marginal individual income tax rate fell from 6.45 percent to 4.8 percent — 26 percent. Texas has no income tax.
In 2013, Oklahoma Gov. Mary Fallin signed House Bill 2032, which cut the state’s top income tax rate from 5.25 percent to 5 percent on Jan. 1, 2015, with a further reduction to 4.85 percent in 2016 if revenue growth exceeds the amount of the cut. The bill also appropriated funds for repairing the state Capitol.
Later that year, the Oklahoma Supreme Court ruled having both provisions in the same bill violated the state’s “single subject” rule. Fallin and State Treasurer Ken Miller, R-Edmond, asserted the provisions all related to the common topic of managing and appropriating taxes.
Last year, Senate President Pro Tempore Brian Bingman, R-Sapulpa, filed Senate Bill 1246, which mirrored language in House Bill 2032. It passed by a 32-10 margin in the Senate and Fallin signed it into law.
The cuts are dependent on revenue triggers, meaning general revenue in Oklahoma must see an increase before the cuts take effect.
“This is a responsible, measured tax cut that will make Oklahoma more economically competitive while providing much needed tax relief to working families,” Fallin said at the time.
Fallin said every Oklahoman will benefit from a stronger economy.
If the state’s top rate drops from 5.25 to 4.85 percent, households in the bottom 40 percent of income brackets will see no change in their taxes, even though they currently pay the highest state and local tax rates overall, the new study finds.
Taxes for the wealthiest 1 percent of households will fall to 4.1 percent of income.
During her recent inaugural address, Fallin touted Oklahoma’s 4.4 percent unemployment rate, the fourth-fastest growing economy in the nation, the second-highest rate of per capital income growth, the highest rate of job creation in the manufacturing sector in 2013 and a balance of $500 million-plus in the state’s savings account.
http://www.edmondsun.com/news/low-middle-income-oklahomans-pay-highest-taxes/article_6142453c-9c30-11e4-97c0-43b340e4ca51.html
