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What’s up this week at Oklahoma Policy Institute? The Weekly Wonk shares our most recent publications and other resources to help you stay informed about Oklahoma. Numbers of the Day and Policy Notes are from our daily news briefing, In The Know. Click here to subscribe to In The Know.
This Week from OK Policy
Policy Matters: We can’t normalize hate: The days following last week’s election have been filled with disturbing reports nationwide about incidents targeting people based on race, gender, identity, and religion. These aren’t isolated occurrences; it’s the result of toxic rhetoric that has permeated public spaces and online platforms in recent years. But we cannot normalize this hate. [Shiloh Kantz / The Journal Record]
A look at the incoming class of state legislators (Capitol Update): This year’s elections have produced an interesting mix of new legislators. The incoming Senate class is unusually large, while the new House members form a somewhat average-sized class. These new legislators will begin their service with new leadership in both chambers and a governor in the last two years of his second term. [Steve Lewis / Capitol Update]
Weekly What’s That
Capital Gains Deduction
A capital gain is a rise in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. Capital gains income is taxable, but may be taxed at a different rate than other forms of income (earned, retirement, dividend, etc.).
In Oklahoma, certain capital gains income is fully deductible from state income tax. The deduction allows taxpayers to exempt from their taxable income any gains from the sale of property located in Oklahoma or stock of a company headquartered in Oklahoma. To qualify for this exemption, the seller must have owned the property for at least five years or the stock for at least two years before the sale.A 2021 report prepared for Oklahoma’s Incentive Evaluation Commission estimated that the capital gains tax deduction led to an estimated $716.3 million in forgone tax revenues from 2014 to 2018, an average of $143.3 million per year, while only creating $403.3 million in positive economic benefits. Fewer than 20,000 taxpayers benefited from the deduction each year, with 66 percent of the credit going to taxpayers with income over $1 million. The report’s authors recommended repealing the capital gains deduction, or, alternately, reconfiguring it to establish clear economic development goals; require that qualified gains be reinvested in Oklahoma; cap the deduction, and target the deduction, such as for farming and ranching operations. The Commission rejected the recommendation and instead called for an interagency task force to study the incentive. The first study of the capital gains deduction, in 2017, recommended its outright repeal, but the recommendation was rejected by the Commission. Legislation to repeal the capital gains deduction, SB 1086, passed the Senate in 2018 but was not taken up in the House.The capital gains deduction cost the state $161.9 million in 2022, according to the Oklahoma Tax Commission, a nearly 50 percent increase from the $108.0 million cost of the deduction in 2020. The deduction was claimed on 20,206 returns in 2022, providing an average benefit of over $8,000.
Look up more key terms to understand Oklahoma politics and government here.
Quote of the Week
“Immigration is key in Oklahoma developing the workforce to have the kind of economy we want. We have to have more workers in our economy. One of the best levers you can pull is bringing immigrants here, but we need them to be able to work, so it needs to be legal immigration.”
– Chad Warmington, who leads the State Chamber of Oklahoma, saying he believes federal officials can close the “back door” to immigrants while still leaving open a “front door” that would create a path to legal status. [The Oklahoman]
Op-Ed of the Week
Opinion, AJ Griffin: Oklahoma children in underserved communities deserve to thrive
As Americans, we take pride in our exceptionalism. Through sacrifice, innovation and a shared vision, America has long stood as a beacon of hope and opportunity for the world. American entrepreneurs exemplify how hard work, tenacity and ingenuity can lead to success. This nation has historically been a land of opportunity — a place where anyone, regardless of background, can achieve their dreams. But today, many American children — especially those in underresourced communities — are not experiencing this promise, despite living in the land of opportunity.
There is a stark disparity in the opportunities available to children in underserved areas, and many of these children are also grappling with the long-lasting effects of trauma. Over 25 years ago, Dr. Robert Anda and Dr. Vincent Felitti unveiled the groundbreaking Adverse Childhood Experiences (ACE) study, linking childhood trauma to a wide range of poor health and social outcomes in adulthood. Since then, thousands of studies have deepened our understanding of how early-life trauma impacts behavior, health and long-term well-being. Yet despite this knowledge, we continue to allow children to grow up in systems that fail to address their experiences. We don’t build resilient communities capable of preventing or mitigating trauma.
[Read the full op-ed from AJ Griffin at The Oklahoman website]
Numbers of the Day
- 24% – Percentage of active-duty service members who were food insecure in 2020. [Feeding America]
- 52.1% – The percent increase in the number of American Indian/Alaska Natives alone (not in combination with any other races) who earned a graduate or professional degree in 2019 (102,882) compared with 2010 (67,644). When looking at undergraduate degrees during that same period, individuals earning associate degrees rose 39.3% to 160,070 while those earning bachelor’s degrees rose 39.7% to 186.657. [U.S. Census]
- 2x – Middle-income taxpayers (those in the middle 20% of wage earners) pay nearly twice as much for sales and excise taxes (4.8% of their income) as they do for income taxes (2.4% of their income). Nationally, middle- and low-income taxpayers typically pay more taxes to their state and local governments based on what they buy (sales and excise taxes) than on what they earn (income taxes). [Institute on Taxation and Economic Policy]
- 277,436 – The total number of Oklahomans who selected or were automatically reenrolled into an Affordable Care Act established Health Insurance Marketplace medical plan through 2024. This represents about 7% of the state’s population. [KFF]
- 2.45 – The median number of children in Oklahoma between the ages of zero to 5 per available childcare slot in the state. This means half of all counties in Oklahoma have more than two children per available licensed childcare slot. [Understanding Access and Barriers to Childcare in Oklahoma / United WE and Oklahoma State University]
What We’re Reading
- SNAP Helps 1.2 Million Low-Income Veterans, Including Thousands in Every State: About 1.2 million veterans live in households that participated in SNAP (formerly food stamps) from 2017 to 2019, analysis of pre-COVID-19 data from the U.S. Census Bureau’s American Community Survey finds. In every state, thousands of low-income veterans use SNAP to help put food on the table. An estimated 21,000 Oklahoma veterans, or 8% of the veterans in the state, received SNAP food benefits during that period. [Center on Budget and Policy Priorities]
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Polling in the Dark: A Call for Accurate Native Voter Representation: Since Election Day, the members of the National Election Pool and countless other outlets, journalists, influencers, and more have reported on the results of the 2024 exit poll, which includes the claim that 65% of Native voters cast their ballots for the Republican Party. Without a deep understanding of how to address the unique challenges of accurately polling Native American communities, future research will only continue to misrepresent Indigenous voices in this country. From our own work, including data from the Indigenous Futures Surveys (2020-2022), we know that Native voters are highly engaged, with a strong turnout in elections and high levels of political activism. [Research for Indigenous Social Action & Equity Center via Native News Online]
- Iowa’s Big Tax Cut for the Rich Already Straining State Services: Iowa is bracing for a $1.1 billion budget hit as it phases in its 2022 flat tax, according to new revenue forecasts. The 3.8 percent flat income tax structure benefits Iowa’s wealthiest residents far more than low- and middle-income families, who already pay a greater share of their income in state and local taxes than the wealthy. Recent estimates from the state’s Department of Revenue show that nearly half of the tax benefits go to the top 5 percent of taxpayers. Millionaires in Iowa will see an average tax cut of $23,471, while households earning under $20,000 will receive just $24 on average — a disparity of over 900 times. [Center on Budget and Policy Priorities]
- Note: Oklahoma lawmakers have previously introduced bills that would move Oklahoma to a flat tax system.
- Note: Oklahoma lawmakers have previously introduced bills that would move Oklahoma to a flat tax system.
- Republican Health Coverage Proposals Would Increase Number of Uninsured, Raise People’s Costs: The Medicaid and marketplace proposals from the Heritage Foundation’s Project 2025 blueprint, the Republican Study Committee’s (RSC) fiscal year 2025 budget, and the Republican House Budget Committee’s (HBC) fiscal year 2025 budget resolution would undermine Affordable Care Act (ACA) coverage protections, make health coverage more costly and less comprehensive, shift more costs to states, and increase the number of uninsured people in the U.S. These proposals would result in a future in which millions more people go without coverage, pay higher premiums if they have pre-existing conditions, or end up with skimpy health plans that don’t cover benefits they need. [Center on Budget and Policy Priorities]
- Impact of Donald Trump’s Tax Proposals by Income Group: President-elect Donald Trump has proposed a wide variety of tax policy changes. Taken together, these proposals would, on average, lead to a tax cut for the richest 5 percent of Americans and a tax increase for all other income groups. If these proposals were in effect in 2026, the richest 1 percent would receive an average tax cut of about $36,300 and the next richest 4 percent would receive an average tax cut of about $7,200. All other groups would see a tax increase with the hike on the middle 20 percent at about $1,500 and the increase on the lowest-income 20 percent of Americans at about $800. [Institute on Taxation and Economic Policy]
