OKPOLICY.ORG
Oklahoma’s massive budget shortfall means that lawmakers face stark choices this year. They can choose devastating cuts to Oklahoma public schools, health care, and other essential services. Or they can shore up the state’s finances and invest in a stronger economy and brighter future for Oklahoma.
The second course is the most reasonable, but to save our most important public investments, the money will have to come from somewhere. Oklahoma has numerous good revenue options to fill the hole, like stopping this year’s tax cut for top earners or reining in tax breaks for businesses and special interests. Unfortunately, state leaders have decided to target a very different kind of tax program. They are threatening our state’s most important broad-based tax credits for families that work hard for low pay.
Oklahoma offers three modest tax credits that primarily support working families. These are the Earned Income Tax Credit, which is designed to encourage work; the Sales Tax Relief Credit, which supports basic nutrition and helps alleviate Oklahoma’s sales tax on groceries; and the Child Tax Credit, which strengthens families caring for children. These credits help more than 400,000 households — over 40 percent of Oklahoma families. For many, they provide just enough breathing room in the family budget to meet basic needs and avoid other forms of assistance. They help reduce some of the imbalance in a state and local tax system that already calls on those who make the least to pay the biggest share of their income in taxes.
[pullquote]”The plan would shift taxes onto those families who were largely left out of Oklahoma’s income tax cuts, and it would have the worst impact on families raising children.”[/pullquote]
A plan being discussed by Legislative leaders would eliminate the Child Tax Credit and reduce by one-fourth the Earned Income Tax Credit and the Sales Tax Relief Credit. This would shift taxes onto those families who were largely left out of Oklahoma’s income tax cuts, and it would have the worst impact on families raising children. For example, the proposal would mean a $180 tax increase for a couple with two children making $35,000. The same family got just $9 from this year’s income tax cut. A middle-income family earning $49,800 a year with four kids would see a tax increase of $270, more than the $228 they have gotten back from every income tax cut in Oklahoma over the past 12 years.
The latest budget proposal from Governor Fallin does not go after the Sales Tax Relief Credit or the Child Tax Credit, but she does propose making the Earned Income Tax Credit non-refundable. That would destroy the primary benefit of the state EITC — providing an annual financial boost that is the only chance for many families to pay down debts or invest in assets for the future. Governor Fallin’s plan would undercut our most successful anti-poverty program with a long history of support from conservative leaders.
Oklahomans strongly oppose ending these broad-based credits. A recent poll by Global Strategy Group found that 59 percent of registered Oklahoma voters oppose ending the credits to reduce the budget shortfall, compared to just 29 percent who support doing so. Voters instead preferred solutions like accepting federal dollars for health care and rolling back some of Oklahoma’s cuts to the income tax rate paid by the wealthiest households.
Despite the clear message from voters, our state leaders’ latest budget plans would do the opposite of what voters want. They would do nothing to roll back or even delay Oklahoma’s income tax cut for the wealthiest, which is costing Oklahoma more than all of the broad-based tax credits put together (the tax cut is costing $147 million while the most recent estimate for the broad-based credits is $106 million).
The parents who are working hard in low-wage jobs already bear the brunt of the damage when Oklahoma cuts education funding, slashes health care benefits, and reduces other important public services. When a tornado blows through, we don’t tell the families who lost their homes to lead the recovery effort. Likewise, Oklahoma lawmakers should not rely on taking from families with the leanest household budgets to fix the state’s revenue problems.
