Targeted relief can help Oklahoma families weather inflation

By gavelling in for a special legislative session to address inflation relief, lawmakers have the opportunity to enact real and positive tax reform. The slate of bills introduced by House leadership offer little actual timely relief to the low- and moderate-income Oklahomans most affected by inflation. A few bills introduced during the special session — and other measures that could be added — would offer targeted and timely relief to the families that need it. 

States have few tools to address inflation 

The primary institution able to address inflation is the Federal Reserve, which is tapering off bond purchases and will likely raise interest rates this week (June 13-17). However, these measures take time to offer relief. Because the Federal Reserve controls the cost and availability of credit nationally, there are virtually no economic or legislative actions that the state of Oklahoma can make to slow inflation. 

That said, our state’s elected officials and policymakers can help low-income households — those most vulnerable to high inflation — weather the inflationary storm until it passes. Targeted relief would help to make up for the loss in buying power experienced by low-income households. This could be done through increasing the values of the Sales Tax Relief Credit and the state Earned Income Tax Credit along with issuing one-time rebates targeted to Oklahomans who need it most.

However, tax cuts or rebates that go to all Oklahomans could make inflation worse. Broadly injecting money into the economy will only further increase demand and in turn further fuel rising inflation. While targeted tax relief to low-income families risks slightly increasing inflation, it would do so much less than across-the-board actions and will help keep low-income Oklahomans afloat, making it a far more prudent policy option. The best thing the Legislature can do is to provide relief to the Oklahomans who are least able to weather price spikes until supply chains return to normal and the Federal Reserve’s actions take effect. 

While inflation’s causes are complicated, the effects are felt most by low-income households 

Today’s inflation is caused by a combination of factors. Constraints on the supply chain have increased production costs to businesses. The pandemic significantly disrupted global supply chains, making it more expensive to produce and ship finished products and component products. Businesses raised prices to account for these supply chain disruptions. At the same time, pent-up demand from middle- to high-income consumers increased demand for scarce goods and services. Wealthier consumers saved more money and had fewer opportunities to spend their disposable income, especially during the earliest days of the pandemic response when businesses closed, cities and states restricted activities, and travel plans were canceled. As businesses reopened and vaccine availability raised consumer confidence, this demand began to be released, causing a surge in overall demand for goods and services. Because of supply chain constraints, businesses could not ramp up supply to meet the surge in demand, leading to higher prices.

More recently, the Russian invasion of Ukraine has increased prices to households and businesses for an uncertain period of time. Russia is a major exporter of oil and gas, as well as metals used in manufacturing, and Ukraine is a major exporter of corn and wheat. The ongoing invasion will almost certainly contribute to higher prices, particularly for food and energy, and no one knows how long the conflict will last.

However, inflation’s pains are not equally felt. Low-income households may be facing an inflation rate more than half of one percentage point higher than the rate faced by the highest-income households. While higher-income households may choose to spend less on luxury items such as high-end electronics or housekeeping services, low-income families have little room to cut back spending. Additionally, the overall inflation rate (8.6 percent as of May 2022) is underpacing the inflation rates of necessary goods like food (10.1 percent) and energy (34.6 percent). Rent in Oklahoma City and Tulsa jumped 15.7 percent and 13.5 percent, respectively, between January 2021 and January 2022. Because low-income households are substantially more likely to rent (rather than buy) their homes than higher-income households — and spend more of their income on food and energy — this will be felt disproportionately by low-income earners. 

Lawmakers should prioritize low- and moderate-income Oklahomans in inflation relief efforts

With prices spiking, low-income Oklahomans need help. However, untargeted efforts such as personal income or corporate income tax cuts will not help them, and in fact these measures threaten to make the problem worse. Additionally, because State Question 640 requires a nearly impossible supermajority to raise revenues, tax cuts are almost certainly permanent and harm Oklahoma’s ability to support its citizens when revenue is low. Although the Legislature has sought to avoid this by introducing some tax cuts with a two-year sunset, those cuts nonetheless will deprive the state of needed revenue for shared services like health care and education while the cuts are in effect — and with little actual relief to the people who need it most to boot. 

However, lawmakers have other options. Expanding the Sales Tax Relief Credit would effectively eliminate or reduce the sales tax on groceries for low- and moderate-income Oklahomans, and expanding the state Earned Income Tax Credit would return more money to the Oklahomans who need it. Lawmakers also have the option to take advantage of this year’s surplus to pass a one-time rebate for low-income households, which would be a light modification of a measure proposed in the Fiscal Year 2023 budget. The one-time rebate was vetoed by Gov. Kevin Stitt, who said it wasn’t adequate. Lawmakers, however, could use legislation during this special session to make it substantially larger while increasing its effectiveness by targeting it to the households who most need relief right now. 

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Adapted from OK Policy’s Inflation in Oklahoma Factsheet (February 2022) fact sheet


Josie Phillips joined OK Policy in June 2020 as a policy intern and transitioned into a policy Fellowship with a focus on labor and the economy in August 2021. She served as a Policy Fellow until July 2022. She currently serves as State Priorities Partnership Fellow with the Maine Center on Economic Policy. Josie graduated from the University of Oklahoma in 2020 with a double major in Economics and International & Area Studies along with a minor in Spanish. While she has dabbled in working with various non profit organizations and a political campaign, her most treasured experience before entering the public policy field has been her time volunteering with the Women’s Resource Center, a rape crisis center and domestic violence shelter in Norman, Oklahoma.

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