Making Oklahoma taxes fairer–from our Online Guide

We’re getting closer to launching the OK Policy Online Guide to Oklahoma Budget and Taxes, a comprehensive resource for understanding state and local government finance in Oklahoma. Most of the guide is factual in nature–how we collect tax dollars, how we spend them, how we make budget decisions, and where you can get more information.

We are an advocacy organization, however, so the Guide points out two major areas where we believe Oklahoma can and must do better. One is the ongoing fiscal gap between our ability to pay for services and our demand for those services. We’ll address that next week. For today, we’ll preview some of the Guide’s discussion of tax fairness.

This graph shows the percentage of income paid in taxes by each of  seven income groups. The regressivity of the system is obvious since the percentage paid in  taxes drops with each increase in income. Those who are in the lowest 20 percent of income earners–making $12,000 or less each year–pay 12 percent (one-eighth) of their income in taxes. The percentage of income paid in taxes falls slightly for each income group above the middle. Those in the top 1 percent–making $250,000 or more each year–pay 8 percent (one-twelfth) of their income.

As much as we argue about taxes, most of us don’t think poor people should pay more in taxes than rich, but that’s how we’ve set up the system in Oklahoma. The Guide does not make recommendations or demands, except to urge we get to work on the problem. It offers a range of options for consideration.

  • Update the sales tax credit that low-income Oklahomans receive on their income tax. Increasing the amount of the credit and making it apply to higher incomes would be a targeted, fiscally responsible way of helping families in need keep pace with rising food costs. (Here’s our earlier fact sheet on this important tax relief measure.)
  • Increase the threshold at which income taxes are first owed. Raising this level would reduce taxes for all income levels and would make a dramatic difference in taxes facing the lowest earners.
  • Increase the income taxed at each tax rate. Once Oklahomans begin paying income taxes, they move up the progressive tax rate structure very quickly.
  • Index the income levels at each tax rate. Oklahoma’s income tax would be lower for all taxpayers and more equitable to low-income taxpayers if it was indexed so that the income level at which a taxpayer reaches a higher rate increases each year along with inflation.
  • Raise the top income tax rate. Oklahoma should explore a higher top rate that applies only at much higher income levels than the current 5.5 percent rate. This report from the Tax Policy Center shows Oklahoma’s top tax rate is in the middle group of states.
  • Provide property tax relief to low- and moderate-income renters. Much of the property tax on renters is passed along to tenants in the form of higher rent, but tenants have no tax relief.
  • More carefully evaluate tax expenditures. Oklahoma’s system to determine the cost and evaluate the effectiveness of tax expenditures should be expanded to all tax breaks. Here are some guidelines from the Center on Budget and Policy Priorities.

At the same time, though, the guide reminds us that the vital goal of tax fairness must be accomplished in a way that does not rely too much on a single tax source and that keeps state and local revenues at a level to support essential public services.


Paul Shinn

Paul Shinn served as Budget and Tax Senior Policy Analyst with OK Policy from May 2019 until December 2021. Before joining OK Policy, Shinn held budget and finance positions for the Oklahoma House of Representatives, the Department of Human Services, the cities of Oklahoma City and Del City and several local governments in his native Oregon. He also taught political science and public administration at the University of Oklahoma, University of Central Oklahoma, and California State University Stanislaus. While with the Government Finance Officers Association, Paul worked on consulting and research projects for the U.S. Environmental Protection Agency, the U.S. Department of Transportation, and several state agencies and local governments. He also served as policy analyst for CAP Tulsa. He holds a Ph.D. in Political Science from University of Oklahoma and degrees from the University of Oregon and the University of Maryland College Park. He lives in Oklahoma City with his wife Carmelita.

Leave a Reply

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