Swapping one tax for a worse one doesn’t pay off

Public education is the foundation of a strong workforce and equal opportunity. It creates pathways for upward mobility and economic growth. In Oklahoma, however, that foundation is increasingly at risk. While lawmakers claim to prioritize public schools, current legislative efforts tell a different story — one where lawmakers are weakening critical funding streams without clear plans to replace them. 

In February, the Board of Equalization revealed the state budget faces a $571 million deficit for the Fiscal Year 2027 state budget, which starts on July 1, 2026. This means that the state has half a billion dollars less to invest in public services than it did last year. This shortfall alone places enough pressure on the state budget, but there are additional pain points present this year. State agencies requested $1.6 billion in additional funding for FY 2027, as years of flat budget requests and reductions in federal funding have left agencies behind. Despite these circumstances, lawmakers are actively pursuing proposals to cut property taxes, expand private school vouchers, and shift the state’s revenue to rely more heavily on unstable revenue sources that threaten the long-term sustainability of public education. 

Lawmakers must fully account for the local level fiscal cost of bills beyond one year and commit to covering any losses through the state budget. Without careful consideration and sustained investment, these policies could undermine the very education system lawmakers say they want to improve. 

Public schools should be our focus, but meaningful change cannot come while revenue is systematically cut

Public education faces several threats this legislative session, first and foremost, from property tax cuts. Anti-property tax sentiment has been strong and building since the last session.

This year, lawmakers introduced more than 100 property tax bills, many of them aimed at cutting taxes. But because Oklahoma’s property tax system is highly complex, seemingly small changes can have large impacts on local revenue. Local public school funding relies heavily on property taxes, which account for a significant portion of total per-pupil funding in Oklahoma. With 81 percent of property tax revenue going to education (public schools and CareerTechs), lawmakers should be cautious and consider the effects of property tax cuts before charging ahead. However, legislators have passed property tax cut bills without any estimates of how much those cuts would cost their districts’ public schools and CareerTechs in local revenue. 

Bills aiming to change property taxes in Oklahoma lack cost estimates

* Estimate provided by Dr. Ryan Kiggins, Assistant Professor in the Department of Political Science at University of Central Oklahoma
** Estimate provided by County Assessors Association of Oklahoma

SJR 39 by Senate Pro Tempore Lonnie Paxton, R-Tuttle, and House Speaker Kyle Hilbert, R-Bristow, is the most concerning. This measure severely restricts future revenue growth from property taxes. It does so by further restricting annual growth limits placed on assessed property values. It lowers the limits placed on annual growth in assessed value by approximately 1 percent across the board: from 3 to 1.75 percent for homesteads/agricultural land and from 5 to 4 percent for all other property. This will limit local communities’ ability to invest in public schools and essential local services, especially in rural areas. The proposed changes would lower the cap for the majority of properties to be less than inflation, so it would effectively be a long-term cut for essential services. A new amendment for SJR 39 also changes the senior freeze by implementing a tiered system of eligibility: as income decreases, the annual rate of growth in assessed value decreases until a certain income is met and the 100 percent freeze applies. 

Oklahoma law already provides protections for property owners by limiting increases to assessed property values. SJR 39 would lower those restrictions on homesteads and agricultural land below the historic inflation rate, effectively shrinking revenue capacity over the long term. SJR 39 creates a widening gap, with fiscal costs compounding each year. Within 10 years, local jurisdictions will have nearly $575 million less annually to spend on critical services. The biggest loss would be for public schools, followed by CareerTechs, county governments (including sheriff’s departments), ambulance services, health departments, and libraries. 

Lawmakers also don’t know how much all the property tax cuts will cost local communities and schools. The full long-term cost of these bills has not been estimated by the Oklahoma Tax Commission, which is the agency that provides official fiscal impacts. This is especially concerning, since any reduction in public school funding through property tax cuts would result in service cuts unless the state increased appropriations through the state school funding formula. A heavier reliance on state aid leads to volatile funding during economic downturns and could lead to an overall decrease in funding for public education, as seen in California. By passing property tax cuts without estimating their costs, lawmakers are flying blind and placing higher costs on future state budgets.

Public education in Oklahoma faces another threat: the Parental Choice Tax Credit. Colloquially called private school vouchers, the Legislature allocates $250 million in public taxpayer funds annually to pay for children to attend private schools. These tax credits largely benefit higher-income households and families that already send their children to private schools. 

Although HB 3705 by Rep. Chad Caldwell, R-Enid, and Sen. Julie Daniels, R-Bartlesville, wasn’t heard by the floor deadline, the Legislature still accomplished expanding the voucher program. House and Senate leadership released the Fiscal Year 2027 budget, which includes a $25 million increase for the voucher program — bringing the program’s total annual funding to $275 million. This shows lawmakers have a strong appetite to expand the voucher program even in a difficult budget year, when lawmakers are preparing to cut SoonerCare. 

Private school vouchers funnel taxpayer dollars away from public schools. Worst of all, private school vouchers hurt rural Oklahomans the most: rural public schools lack sufficient investment, while vouchers are largely useless to rural Oklahomans because private schools are primarily located in urban or suburban areas. SB 1391 by Sen. Darcy Jech, R-Kingfisher, would have limited income eligibility to $150,000 for households to qualify for the private school voucher, but the bill failed in committee. Other bills that aimed to add transparency requirements (HB 1742 and HB 3677) also failed to move forward. 

Public education in Oklahoma requires consistent and long-term investment. While legislators have increased investment in education in the last few years, they risk undoing all that good by promoting property tax cuts and continuing to expand the private school voucher program. These harmful ideas divert funding away from local schools and communities.

Sales taxes cannot make up for property tax cuts 

When asked how the necessary revenue lost through property tax cuts will be made up, lawmakers have suggested increasing city, county, and state sales tax. 

Sales taxes are not a good replacement for property tax revenue: they fluctuate dramatically from month to month, hit low-income households the hardest, and the state or city/county officials would have to increase sales taxes significantly to cover the lost revenue. Depending on the Legislature’s actions, the combined state and local sales taxes could increase to anywhere between 10-20 percent to make up lost revenue. Oklahoma already has the 6th highest state and local combined sales tax rate in the nation at 9 percent. Increasing it further would only worsen Oklahoma’s affordability crisis. During local elections on April 25th, proposals to increase sales taxes to fund local initiatives failed in Moore, Broken Arrow, and McAlester. This signals that taxpayers have a limited appetite — if any — for increased sales taxes to offset property tax revenue losses. 

Lawmakers intend to increase reliance on sales tax to fund schools, emergency services, and more, yet simultaneously introduced more than thirty sales tax exemption bills. These bills reduce overall sales tax revenue by allowing some populations/industries to avoid paying sales tax on certain items. While not inherently bad policy, when used excessively, they shift the cost of sales taxes onto an ever-smaller share of the population. 

A handful of sales tax exemption bills are still progressing through the Legislature. HB 4340 by Rep. Anthony Moore, R-Clinton, and Sen. Casey Murdock, R-Felt, establishes a sales tax exemption for frack water sold to oil and gas producers. HB 2967 by Rep. Rick West, R-Heavener, and Sen. Shane Jett, R-Shawnee, expands the list of vehicle ownership transfers exempt from motor vehicle excise tax. HB 1242 by Rep. Judd Strom, R-Copan, and Sen. Murdock expands the agricultural sales tax exemption by adding deer and elk to the definition of livestock. 

Like tax cuts, sales tax exemptions are popular but can be harmful in the long term by benefiting a select group of people at the expense of others. Lawmakers can’t keep shrinking the sales tax base while relying on sales taxes to replace income taxes and property taxes. This leads to a system heavily reliant on a single source of revenue that only applies to ever-shrinking portions of the population.

Budget and tax policy is a choice: the state is at a tipping point

Budget and tax policy result from a series of choices and prioritization. Since 2018, lawmakers have prioritized tax cuts, which have cost the state $1.6 billion annually. The consequence is less tax revenue and, therefore, revenue cuts. Further revenue reductions, such as property tax restrictions, will jeopardize the fiscal stability of state and local governments in the coming years.

Oklahoma’s public schools cannot thrive amid uncertainty and shrinking revenue. Property tax cuts enacted without fiscal clarity, the continued expansion of private school vouchers, and an overreliance on sales tax all point to a troubling trend of disinvestment. These policies not only strain school budgets but also disproportionately affect rural communities and low-income families. If lawmakers are serious about strengthening public education, they must prioritize stable, equitable funding solutions rather than short-term political wins.