OKPOLICY.ORG
A couple of freshmen senators from Oklahoma’s two largest metro areas have made a bipartisan request for a legislative interim study to look for ways to “stabilize” municipal funding in Oklahoma. Sen. Christi Gillespie, R-Broken Arrow, and Sen. Mark Mann, D-Oklahoma City, made the request. It has been assigned to the Senate Local and County Government Committee, chaired by Sen. Warren Hamilton, R-McCurtain, who will decide whether to schedule the study.
For years, Oklahoma’s cities and towns have struggled to find the means of maintaining adequate municipal services. Their revenue mainly comes from city sales tax, use taxes on out-of-city purchases, hotel taxes, and service fees. Approval of any sales tax increase requires a public vote, and their effectiveness as a revenue source is limited by the existing state sales tax rate of 4.5 percent, along with additional county sales taxes.
The “big three” of general taxes in Oklahoma are the income tax, the property tax, and the sales tax. Since only the sales tax is available to Oklahoma municipalities, the question will arise whether cities and towns should be allowed to impose local income or property taxes.
Some states allow local income taxes. Missouri, for example, has a local income tax of 1 percent for residents of St. Louis and Kansas City. Other states, like Texas, share property taxes with cities. In Oklahoma, property taxes are only available to pay for bond issues, not for the municipal operations budget for core services.
Efforts have been made throughout the years to find a new or better source of revenue for municipalities, but they have mostly stalled in the legislature. Sen. Mann mentioned the possibility of “revenue sharing,” something the state already does in some instances. For example, the state earmarks funding for county roads and bridges.
While the proper mix of state and local taxes is likely a challenge everywhere, Oklahoma is more centralized in its funding than most states. Property taxes are extremely unpopular, limiting municipal governments, and sales taxes are often considered maxed out with most areas having a total sales tax between 9 and 11 percent.
With the state income taxes on the chopping block in recent years, it seems unlikely the legislature would allow cities to impose a local income tax. Perhaps some form of revenue sharing has possibilities. Sens. Gillespie and Mann have their work cut out for them, but with both federal and state revenues under political attack, someone must pay for public services. Perhaps their timing will be right to help municipalities get a piece of the pie.
