Tax Fairness

Tax Fairness

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. A 2015 study by the Institute on Taxation and Economic Policy shows that lower income Oklahomans pay a considerably higher percentage of their income in state and local taxes than higher income Oklahomans.

taxes-share-of-family-income
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 $18,000 or less each year–pay 10.5 percent (up from 9.9 percent in 2009) 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 $418,000 or more each year–pay just 5.1 percent (down from 5.6 percent in 2009) 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. Reforms in all three taxes, as discussed in the following sections, could make them 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 ››

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