OKPOLICY.ORG
Original at http://newsok.com/tax-policy-rarely-devoid-of-wedge-driving-arguments/article/3547959
By The Oklahoma Editorial Board
A truly “fair” income tax system would assess everyone, rich or poor, at the same level and offer no exemptions or deductions. Public policy is rarely based solely on fairness, though, so the federal income tax system is designed to take a lot more from the rich than it does from the poor.
Oklahoma’s personal income tax system is also progressive, taking a higher percentage of income from those on the upper end of earnings than it does from those on the lower end. Since the rich pay much more in taxes, it follows that they benefit much more from tax cuts. The cut scheduled to begin next Jan. 1 will be used as fodder to advance class-envy arguments that were tiresome 10 years ago and are even more so today.
The Oklahoma Policy Institute is supplying data that will be exploited by the class-envy crowd. Next year’s reduction in the state income tax top rate, from 5.5 percent to 5.25 percent, will put nearly $2,000, on average, into the pockets of the wealthiest 1 percent of Oklahomans and only $6 into the pockets of lower-income Oklahomans.
Reducing taxes for the wealthiest 20 percent of Oklahomans will take, on average, $791 per taxpayer out of the revenue stream. Is this a good thing or a bad thing? The answer is that it’s neither, when the analysis is stripped of emotion. But just as public policy is rarely based solely on fairness, tax policy is rarely devoid of wedge-driving arguments.
Next year’s tax cut was triggered by a provision enacted in better times. The state was recording large budget surpluses and the income tax was seen as putting Oklahoma at a competitive disadvantage relative to states that have no personal income tax.
The state will lose an estimated $120 million a year as a result of the next drop in the income tax. As noted, most of that money will go to the wealthiest taxpayers because they pay the most in taxes (and will continue to pay the most in taxes).
Whether the drop will entice entrepreneurs to move to Oklahoma, or provide an incentive for those already here to remain, is debatable and would be difficult to quantify in any case.
“By taking so much revenue away and giving the benefits to a relatively small group,” the policy institute says, “the state will be shifting a larger proportion of the cost of providing services onto lower- and middle-income Oklahomans.”
This sounds as though the rich will get a tax cut and the poor will get a tax increase. That’s not true.
Policymakers decided years ago that state government was overtaxing the people and so they reduced taxes. If people of all incomes want to return to the old rate and pay more taxes, they will insist on it.
