Oklahoma’s Tax Mix

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state-and-local-taxes-by-source-2013

Sales and income taxes are the largest Oklahoma taxes.  The lion’s share of tax revenue in Oklahoma, as in most states, comes from three major sources:

  • The general sales tax is the single largest tax source for Oklahoma governments, contributing 33 percent of tax revenue and 14 percent of total government revenue of all types in 2016;
  • The individual income tax–all of which goes to the state–is the second largest source; it made up 22 percent of tax collections and 9 percent of all revenue in 2016; and
  • The property tax, levied only by local governments, is the third major tax source for Oklahoma governments. It accounted for 20 percent of 2016 tax revenue and 8 percent of all governmental revenue.

Of the smaller taxes, only the severance and motor vehicle taxes contribute even five percent of tax revenue. The severance tax on oil, gas, and other minerals is part of “Other Taxes” on the chart below.

state-and-local-tax-revenue-by-type-1996-2012

Income, sales, and property taxes have grown more than other taxes over time. The general sales tax and individual income tax have become more important since both are highly responsive to gains in income and to inflation. Sales tax growth has been steady for most of the last 25 years, with temporary slowdowns or dips during recessions. The income tax is more sensitive to the economy than the sales tax. It took eight years, from 20018 to 2016, to recover from two recessions. Growth in income tax revenue has also been restricted by tax cuts enacted by the Oklahoma Legislature in the mid-2000s. Property taxes grew more quickly than the income tax from 2006 to 2008, and briefly eclipsed individual income tax revenues in 2010.

The “Other” category, which includes severance taxes on oil and gas production, has been the most volatile source; it grew rapidly from 2002 to 2006 and then began to level off as prices and demand peaked. Subsequent changes in tax policy further reduced the importance of severance taxes as a source of revenue. The graph also shows other impacts of changing tax policy. For example, voters lowered motor vehicle taxes in 2000 and raised tobacco taxes in 2004.

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