The Fairness Gap

Most Americans agree that in a fair tax system, lower income taxpayers should not pay a higher percentage of their income in taxes than those with higher incomes. Oklahoma’s tax system does not meet this simple fairness test for a number of reasons.

Low- and moderate-income Oklahomans pay more of their income in taxes than do wealthier Oklahomans. This is called a regressive tax structure.

This graph shows the percentage of income paid in state and local 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 $19,700 or less each year–pay 13.2 percent (up from 10.5 percent in 2015) of their income in taxes. The percentage of income paid in state and local taxes continues falling as household income increases. Those in the top 1 percent — making $455,600 or more each year–pay just 6.2 percent (up from 4.3 percent in 2015) of their income in state and local taxes.

The graph shows that the income tax is progressive, as intended, but not progressive enough to make up for the regressive burden that sales and property taxes put on lower income taxpayers. 

The chart below shows that Oklahoma taxes have become more unfair over time. In 2015, Oklahoma’s was the 16^th most regressive tax system; by 2018 it was the 9^th most regressive. The gap between what the lowest 20 percent and highest 1 percent pay was wider in 2018 than any time in the 25 years ITEP has reported this data. Since 2003, the share paid by the lowest 20 percent has increased ten percent, while the share paid by the to 60 percent has fallen.

Tax reforms discussed in the following sections, could make Oklahoma taxes fairer while maintaining existing revenue levels.

‹‹ Go back to Expenditure Options to Close the Fiscal Gap | Go on to Progressive Features of the Tax System ››