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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.
Tax proposals this session fail to deliver inflation relief, jeopardize state’s long-term fiscal health: With $10.8 billion in recurring revenue and at least $1.6 billion in one-time funds, the Oklahoma Legislature has significant fiscal decisions to make this session. Oklahoma leaders have repeatedly stated their intentions, including House Speaker Charles McCall who wants to provide “inflation relief” and Gov. Kevin Stitt who heralds a commitment to “fiscal discipline.” However, most of the legislative proposals made public so far do not meet either goal. [Emma Morris / OK Policy]
- Watch Now: OK Policy’s 2023 State Budget Update [YouTube]
Oklahomans deserve justice reform; there is still time to deliver results this session: Now that the Oklahoma state legislature is roughly halfway through the 2023 session, there is still time for lawmakers to prioritize criminal justice issues. In recent years, Oklahoma has made some progress in modernizing the state’s justice system and alleviating the pressure on Oklahoma’s prisons and jails. Despite recent progress, Oklahoma still ranks third in the nation for overall incarceration. During the remainder of the 2023 session, Oklahoma legislators have an opportunity to address pressing criminal justice issues, implement measures that will decrease the number of people going to prison and jail, expand on previous initiatives, and provide genuine public safety for every community. [David Gateley / OK Policy]
Change requires patience and persistence: SB 706 provides great example of representative government (Capitol Update): SB 706 would bring about a fundamental change in legal rights between parents, children, and the state. What caught my attention about SB 706 was not the bill itself — as significant as it is — but the author. Sen. Pederson, in explaining the bill, said this kind of legislation was “totally out of my wheelhouse” when he joined the legislature seven years ago, but he was persuaded by advocates from his district that something needed to be done to speed up the process of terminating some parents’ parental rights. [Steve Lewis / OK Policy]
Policy Matters: Upcoming local elections vitally important: “Think globally, act locally” may be a well-worn phrase, but it should serve as a north star for Oklahomans who want to create change. That’s why the upcoming April 4 election for school boards and municipal general elections are so important to our state’s future. [Shiloh Kantz / Journal Record]
Wednesday, April 5, 6:00 p.m.: Protecting Democracy Affinity Group Meeting (online only). We’re joining forces this week with The League of Women Voters, We Are Rising, Indivisible Oklahoma, and the other organizations and individuals working to strengthen our democracy. This meeting will be an opportunity for us to come together, share ideas, and discuss ways to ensure that our voices are heard. [Join the Meeting]
Individual Income Tax
The individual income tax is Oklahoma’s largest single revenue source for state government. Oklahoma first levied an income tax in 1915. The top income tax rate has been cut repeatedly since the late 1990s, and most recently was lowered to 4.75 percent as of 2022. Oklahoma has a graduated income tax, with multiple tax brackets; however, the top rate applies to all taxable income above just $7,200 for an individual or $12,200 for a married couple filing jointly or single head of household. Numerous deductions and credits can reduce state taxable income, including the standard deduction, personal exemption, earned income tax credit, child tax credit, and others.
The individual income tax is paid to the state in annual or quarterly payments or in withholdings from wages and other payments. Taxpayers file a return in April to settle the tax liability or credit for the previous year.
Currently, the lion’s share of individual income tax collections (85.41 percent in FY 2023) are apportioned to the General Revenue Fund, with the remainder divided between the 1017 Fund (8.34 percent), the Teachers’ Retirement Fund (5.25 percent) and the Ad Valorem Reimbursement Fund (1.00 percent).
Individual income tax collections totaled $3.547 billion in FY 2021, accounting for 37 percent of total state tax revenue.
Look up more key terms to understand Oklahoma politics and government here.
“Approximately 90% of Oklahoma families choose their local public schools. Public funding belongs in public schools.”
-Sen. Carri Hicks, D-OKC, speaking about proposed bills that would provide private school tax credits that overwhelmingly benefit wealthy Oklahoma families at the expense of poorer ones. [Journal Record]
Enid News & Eagle Editorial: How committed are legislative leaders to funneling taxpayer funds to private education?
As proposals to funnel taxpayer funds toward private education have seemed to gain traction in the Oklahoma Legislature this year, we have to wonder how committed either House Speaker Charles McCall or Senate Pro Tem Greg Treat really are on these proposals.
If you’ll remember, it was McCall last year who put the brakes on vouchers, or school savings accounts, during last year’s legislative session. He and other rural lawmakers had listened to concerns from their rural constituents about the negative impact such proposals could have on public schools in mostly rural areas.
While McCall wrote this year’s bills to boost per-pupil funding of public schools by $300 million, raise teacher pay by $2,500, add $50 million to grants for school facilities, and offer refundable tax credits to families of private-school and home-school students, he also made a very public threat to the Senate not to change a thing in his bills.
Well, that’s not how it works in the Legislature with two legislative bodies. When one body writes a bill, the other body always offers changes or amendments; then, the bodies hash out the details in a committee.
So, of course, the Senate came up with its own modifications, increasing the House’s tax credit proposal, lowering credits for home schoolers and putting an income cap for families eligible for the credits. The Senate bill cost is about $170 million lower than the House proposal.
And now, Senate leader Treat is saying the House’s bill will “fail miserably” in the Senate if the amendments aren’t considered.
We’ll see if the two bodies actually come to some kind of consensus, but it didn’t happen last year due to McCall, and it may not happen this year, also due to McCall’s threats that no changes from the Senate will be acceptable.
Public school advocates likely hope the two legislative bodies won’t come to consensus, and that taxpayer money won’t be funneled to private education.
It could just be a cat and mouse game between the two legislative body leaders that will eventually get hashed out; or, it could be a calculated strategy by the two leaders to stall the measure once again and come away with their hands clean.
Stay tuned!
- 16.9 – Percentage of Oklahoma women who live in poverty, compared to 14.3 percent for Oklahoma men. [U.S. Census via OK Policy]
- 2.3% – State and local taxes account for just 2.3 percent of the expenses paid by business owners, with the other 98 percent is dominated by payroll, equipment, and real estate costs. [Institute on Taxation and Economic Policy]
- >60% – In an analysis of private school voucher tax credits in three states —Arizona, Louisiana, and Virginia— at least 60% of all voucher tax credits go to families with annual incomes over $200,000. [ITEP]
- $271 Million – The projected annual cost (state revenue loss) for the private school tax credits program outlined in the House version of HB 1935. [Oklahoma House of Representatives]
- 25th – Oklahoma is ranked 25th nationally for its effective real-estate tax rate, but the state’s annual tax collections would be the nation’s 10th lowest based on annual taxes on a home priced at the state’s median value. [WalletHub]
- Expanding Work Requirements Would Make It Harder for People to Meet Basic Needs: Taking benefits away from people who don’t meet a work requirement does little to improve long-term employment outcomes. Instead, it substantially increases hardship. [Center on Budget and Policy Priorities]
- The Pitfalls of Flat Income Taxes: While most states have a graduated rate income tax, some state lawmakers have recently become enamored with the idea of moving toward flat rate taxes instead. A flat tax is one where each taxpayer pays the same percentage of their income whereas a graduated tax applies higher rates to higher incomes. Flat taxes have some surface appeal but come with significant disadvantages. Critically, a flat tax guarantees that wealthy families’ total state and local tax bill will be a lower share of their income than that paid by families of more modest means. [Institute on Taxation and Economic Policy]
- After two decades of studying voucher programs, I’m now firmly opposed to them: Vouchers are dangerous to American education. They promise an all-too-simple solution to tough problems like unequal access to high-quality schools, segregation and even school safety. In small doses, years ago, vouchers seemed like they might work, but as more states have created more and larger voucher programs, experts like me have learned enough to say that these programs on balance can severely hinder academic growth — especially for vulnerable kids. [Josh Cowen / Hechinger Report]
- Pawns in the Voucher Scheme: What started in Arizona in 2011 as a $2.5 million state voucher program for students with special needs has now ballooned to a universal voucher program for all of the state’s students, public or private. Critics say Arizona used vouchers for special needs students as a trojan horse for school privateers to divest, divert, and dismantle the state’s public education system, which now ranks in the bottom three among all U.S. states for per-pupil spending, teacher retention, and teacher pay. [Texas Observer]
- Texas Is On The Cusp Of Trouble: A secret to Texas’ success has been, without question, its lack of an income tax. A zero-rate income tax is a business magnet. States with no income taxes can have other forms of taxes that are on the large side. The property tax is the big tax in Texas. It has gotten large enough to become a clear problem. If Texas does not address itself to this problem and, crucially, solve it correctly, the Texas miracle will be in jeopardy. [Forbes]
