Oklahoma’s Tax “Trigger” Equals Budget Perils (Duncan Banner)

By Kenneth Wells

On April 15, 2012, in a blog by Oklahoma Policy Institute, Gene Perry wrote about the blindness of both our governor and legislature to set in law an automatic one-quarter percent Income Tax Deduction, to be “triggered” each time this state’s income reached five percent greater than the previous year. Now the “Law of the Land,” this reduction was “set aside” until now for lack of funds to cover the state’s operating expenses. Primarily benefiting the most prosperous of Oklahoma’s population and businesses, we are told it will go into effect in 2016. Oklahoma’s constitution states that a favorable vote of 75 percent of the legislature is required to raise income taxes. When our state government’s income drops below sustainable levels, will 75 percent of its legislature vote favorably to correct this “triggered” disaster?

Mr. Perry stressed three major flaws in “triggers” which are relevant in today’s economy with the drop in crude oil prices. They are:

  • “Triggers would prevent us from climbing out of budget holes. The cut that went into effect this year (2012) was triggered by growth that was only a partial recovery from the worst revenue collapse in decades.
  • “Year to year revenue growth is not ‘extra money.’ As the economy grows, Oklahoma will have to deal with inflation, a larger population, and more infrastructure to maintain.” He went on to write, We have an aging population that will require more public support while contributing less productivity to the economy. We have deteriorating transportation and water infrastructure that will bring escalating repair bills.
  • “The trigger sets the wrong priority for Oklahoma. Our state has a dire need for investments in numerous areas. We must improve student achievement to meet increasingly strict testing requirements. We must fix a child welfare system that is putting kids in danger. We must treat an epidemic of mental health and substance abuse.”

These predictions by Mr. Perry have come to pass. In November 2014, the State Board of Equalization certified that Oklahoma’s income would grow enough in 2016 to “trigger” a cut in the state’s top income tax rate. This was predicted while at the same time announcing that the state will have close to $300 million less revenue available in the 2016 budget.

2016’s “trigger” was approved because the 2014 legislature “set aside” the tax cut for 2014-2015 in order to balance this budget. Even then, they have had to use “one-time” revenues that will not be available again. Those revenues were from The General Revenue Fund, $101 million from the Cash Flow Reserve Fund, and $181 million from other funds.

We will be forced to find other avenues of raising revenues for our local entities as the state trims funds to balance its next budget. This only places more of a financial burden on everyone, but particularly on those individuals working for $2.13 per hour plus tips, at, and barely above minimum wage.

The school districts are already operating with less money than they did in 2008 with an ever-increasing student population.

“We are facing large budget shortfalls for the second straight year despite enjoying one of the strongest economies in the nation. Many factors, including tax cuts, ballooning tax breaks, growing off-the-top allocations, economic shifts, court decisions and more have ensured, even in the good times, we fall far short of meeting our obligation to fund our schools, public safety, health care, and other core services at appropriate levels. The need for an honest assessment of what we expect from state government, how much it will cost, and how we will pay for it is more urgent than ever.” (Oklahoma Policy Institute)

We need to reestablish “social capital” in all of our daily lives and government. We as a people have become enamored with “I” instead of “we.” We must overcome this “my side is absolutely always right” attitude, sit down and come to an agreement that is equal for all!




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