We recently wrote about another tax break moving through the Oklahoma Legislature without any evidence that it will work or how much it will cost. HB 1747, by Rep. Tom Newell (R-Seminole), would create “Rural Opportunity Zones” where anyone moving from out-of-state to a county that is projected to lose population would be exempt from paying state income tax for five years.
The bill is modeled after a similar proposal in Kansas put in place and promoted by Governor Sam Brownback. In a recent KOCO story, Rep. Newell commented, “Kansas has had it on the books for like three or four years and every year they have actually added more counties to it because it has been so successful.”
Unfortunately, the fact that legislators are expanding a tax break does not constitute evidence that it is successful.
For real evidence, we can look at migration in the counties before and after the tax break. Kansas lawmakers created the tax exemption in 50 counties beginning in 2012, and they added another 23 counties in 2013. According to the U.S. Census, the counties designated as “Rural Opportunity Zones” in 2012 had a net loss of 473 people due to migration between 2010 and 2011. In the three years since the tax break was created, these counties had an average annual loss of 713 people, even more than they were losing before the tax break went into effect.
[pullquote]In the three years since the tax break was created, the Kansas ‘Rural Opportunity Zones’ averaged a net loss of 713 people per year.”[/pullquote]The counties added to the program in 2013 did not show much better results. The year before the tax break went into effect, these counties saw a net migration loss of 1,121 people. In the two years since, they’ve lost an average of 1,003 residents per year. Altogether, the Kansas “Rural Opportunity Zone” counties saw a net migration loss of 2,108 residents in 2014. (You can download the full data set here.)
Kansas as a whole is a terrible model for policies to attract new residents. Since 2010, about 15,300 more people moved out of Kansas than moved into the state, the sixth highest net migration loss in the country. Between 2013 and 2014, more than two-thirds of Kansas counties saw no growth or declining population. Under Governor Brownback, the state’s numerous tax cuts have brought large revenue losses and drained funding away from schools and other state services, while the Kansas economy continues to perform worse than the U.S. as a whole.
Rep. Newell’s eagerness to use the expansion of the tax break as evidence for its success also confirms our previous warning about the bill — if HB 1747 passes, it won’t be long until lawmakers seek to expand the number of counties given this tax break, even if there’s no evidence that it is working. That’s a frivolous waste of tax revenue, especially when lawmakers are already looking at slashing their support for schools, public safety, and other vital services.