Slashing taxes further is not the path to a strong economy

When any company leaves Oklahoma, it can mean hard times for the employees and their families. As a state and a community, we should offer support to those families and make sure workers have what they need to move on in their careers.

What we shouldn’t do is let one anecdote be used to manipulate us into making policy changes that aren’t thought through. The recently announced shutdown of Apache Corp.’s Tulsa regional office is a good example.

The company’s new CEO said it is shutting down the office as part of a company-wide streamlining that will reduce Apache Corp.’s regional offices from seven to three. In the announcement, the CEO said nothing about taxes or a lack of support from the state of Oklahoma. In fact, Apache Corp. was recently awarded up to $6.6 million in Quality Jobs subsidies from the state for its jobs in Tulsa.

Unfortunately, that hasn’t stopped a prominent Oklahoma anti-tax lobbyist from trying to use these moves as an excuse for more tax cuts. OCPA Impact’s Dave Bond wrote, “This is yet another example of how higher-tax states tend to lose out, over time, to more favorable low-tax locales.” Except that’s not happening. The most recent large-scale study into the relationship between state taxes and economic growth found that neither tax revenues nor top income tax rates have a stable relationship to employment across states or over time. In other words, whatever is causing differences in states’ prosperity, it’s not taxes.

Consider this finding from the Center on Budget and Policy Priorities: “Four of the six states that cut personal income taxes significantly in the 2000s have seen their share of national employment decline since enacting the cuts.” Oklahoma was one of the few states that saw our share of employment grow after tax cuts, but it shouldn’t be difficult to see that the run-up in gas prices and the fracking boom were the real determining factors behind this growth.

The evidence shows that migration of companies isn’t significantly motivated by state tax rates, and migration of people isn’t either. Take it from another oil company leader who in recent years moved his corporate headquarters from Oklahoma to Houston. Conoco-Phillips President Jim Mulva said in 2011, “I will tell you that state income tax had absolutely no impact in terms of the decision of merging the company and where the corporate headquarters is located.” Or from Wes Stucky, CEO of the Ardmore Development Authority, who said, “For 24 years, I’ve been conducting interviews with executives of companies that we tried to recruit to Ardmore that ended up locating elsewhere. Not once in all those years did a company that rejected Ardmore base its decisions on taxes.”

Tax rates had little to do with our prosperity, but Oklahoma went ahead and slashed taxes during the good times. The result is a huge budget gap that is devastating our schools, infrastructure, public safety, and other services that are critical for keeping Oklahoma prosperous and a great place to live. Going further down that road when we can afford it even less is no recipe for a strong economy.

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ABOUT THE AUTHOR

Gene Perry worked for OK Policy from January 2011 to June 2019. He is a native Oklahoman and a citizen of the Cherokee Nation. He graduated from the University of Oklahoma with a B.A. in history and an M.A. in journalism. Gene also serves on the board of the Oklahoma Sustainability Network, is a trustee of the Oklahoma Foundation for Excellence, is a member of Investigative Reporters and Editors, and has chaired the communications advisory committee for the State Priorities Partnership, a nationwide network of state fiscal policy think tanks. He lives in Tulsa with his wife Kara Joy McKee, who is a Tulsa City Councilor.

One thought on “Slashing taxes further is not the path to a strong economy

  1. Every decision in the late Soviet Union had to be purified through ideological filters detached from reality before anyone could deal with problems there. The “late” Soviet Union.

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