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
Statement from OK Policy regarding the governor’s latest call for special session: Instead of grandstanding with yet another special session call, the governor could ask lawmakers to deliver targeted relief to everyday Oklahomans who need it most, rather than across-the-board tax cuts that overwhelmingly benefit the wealthy. The governor’s latest call for a special session — to occur just one week before the regular session starts — is merely political theater that seeks to circumvent the regular legislative process and waste taxpayer dollars. [Full statement and additional research from OK Policy]
- From OK Policy: Everyday Oklahomans will be hurt by sweeping revenue cuts
Gov.’s task force is latest step away from practical solutions in Tribal/state relations (Capitol Update): The dispute over state/Tribal law enforcement jurisdiction brought about by the U.S. Supreme Court’s McGirt v. Oklahoma decision in 2020 took its latest turn last week. Members of the Inter-Tribal Council of the Five Civilized Tribes (Cherokee, Chickasaw, Choctaw, Muscogee, and Seminole Nations) rejected participation in Gov. Stitt’s One Oklahoma Task Force. [Steve Lewis / Capitol Update]
- From OK Policy: The 2023 legislative session included significant tribal-state bills and a respect for tribal sovereignty from state lawmakers
Policy Matters: Oklahomans need solutions, not grandstanding: When we elect folks to public office, they’re supposed to represent our best interests while tackling large-scale problems. The grandstanding from some Oklahoma politicians lately, however, is doing nothing to solve pressing issues facing our state. The most recent example came Tuesday when the governor called for yet another special session — his second special session call in four months — to direct lawmakers to cut the state’s personal income tax. [Shiloh Kantz / Journal Record]
Dr. King’s dream of economic freedom (Commentary): As we celebrate the life of Dr. Martin Luther King, Jr., we should not forget that the context of his famous “I Have a Dream” speech was primarily about economic freedom through quality jobs with good benefits that pay a living wage. Dr. King understood, then as it is now, that income inequality binds Americans into a cycle of poverty that often becomes generational. Poverty lowers life expectancy as well as educational attainment, which is a predictor of wealth for all races. [Kandis West / OK Policy]
January 23, 6:00 p.m. [Tuesday]
ONLINE AFFINITY GROUP: Safe Communities (Criminal Justice Reform)
The Safe Communities/Justice Reform Affinity Group is for advocates with an affinity to help make our communities safer. This statewide group meets online regularly in the winter and spring to discuss legislation, share resources, and plan community outreach related to criminal justice reform in Oklahoma.
January 30, 6:00 p.m. [Tuesday]
ONLINE AFFINITY GROUP: Thriving Families (Hunger, Housing, and More)
The Thriving Families Affinity Group is for advocates of policies that help all Oklahomans thrive, including access to affordable housing and nutritious food. This statewide group meets online regularly in the winter and spring to discuss legislation, share resources, and plan community outreach.
January 31, 6:00 p.m. [Wednesday]
ONLINE AFFINITY GROUP: Healthy Oklahomans (Health Care Access)
The Healthy Oklahomans Affinity Group works on safeguarding and expanding access to health care in Oklahoma. This statewide group meets online regularly in the winter and spring to discuss legislation, share resources, and plan community outreach related to health care reform in Oklahoma.
Weekly What’s That
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.
As of FY 2024, the lion’s share of individual income tax collections (85.41 percent) 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).
Quote of the Week
“For anything more than a mild downturn, the State would not be positioned to offset much of the impact with its current reserves.”
– Analysis by the Legislative Office of Financial Transparency and Moody’s Analytics Team. [Tulsa World]
Editorial of the Week
Gov. Kevin Stitt is calling the Oklahoma Legislature back into special session Jan. 29, 2024, to consider a single topic: cutting the state income tax rate by 0.25%. It’s a plan that scores political points but lacks practical common sense.
Certainly the idea of paying less income tax is appealing to Oklahoma voters. But, the special session at this point appears doomed to failure, with Senate leadership poised to adjourn the special legislative session just minutes after it begins.
Timing for such a special legislative session is awkward, coming just a week before the Legislature begins its regular spring session. Cutting the Oklahoma income tax, a huge source of money state government uses to pay for important services, is not something that should be done on short notice in a special session. It should be contemplated only as part of full state budget discussions and negotiations.
The Oklahoma Constitution requires the governor and Legislature to balance the budget. So, when Stitt is pushing to cut the state income tax, expense cuts or an alternative revenue source should be identified. That’s not the situation here.
Next month, Stitt will present his State of the State speech and will propose his budget for the coming fiscal year. That’s the proper time and place for such a tax cut proposal. By that time, state leaders also will have the latest update on the state’s economy and what income state government is expected to receive for 2024-25 operations. Other proposals, such as eliminating the state’s sales tax on groceries, can be considered as well.
Many state legislators are understandably reluctant to eliminate a tax or cut a tax rate. Such cuts are effectively permanent, because a large supermajority of both houses is required for the Legislature to reverse course and increase taxes in case of a future revenue shortfall. That’s a really high hurdle for any decision and especially a tax decision. With the state receiving a large chunk of revenue from a tax on oil and gas production, and that production tax depending on an often-volatile energy market, the state’s revenue is far from guaranteed.
The idea of reducing the tax rate is appealing to Oklahoma voters, and such a reduction still could be approved this spring. But, the single-issue special session is not the right way to make that happen.
Numbers of the Day
- $15 – A .25-percent reduction in Oklahoma’s personal income tax would result in the lowest-income Oklahomans receiving $15 back while middle-income taxpayers would get back only about $93. The wealthiest 1% would get about $2,380. [Institute on Taxation and Economic Policy via OK Policy]
- $10 – Analysts estimate that in the long-term, some programs that reduce poverty and provide direct resources for children and families can return $10 for each dollar invested. [Tax Policy Center]
- 232,000 – Estimated number of Oklahoma children in low-income families who would benefit from the proposed bipartisan federal Child Tax Credit expansion. [Center on Budget and Policy Priorities]
- 51.7% – Percentage of eligible Oklahomans who participated in the federal WIC food program for women and children. About 171,600 Oklahomans were eligible in 2021, but only 88,800 participated in the program. WIC has frequent in-person appointments for education and monitoring, conditions that have long suppressed participation. [USDA]
What We’re Reading
- In Most States, the Tax Code Makes Inequality Worse: The vast majority of state and local tax systems are upside-down, with the wealthy paying a far lesser share of their income in taxes than low- and middle-income families. The overall regressivity in state and local tax codes is in large part the result of weak or nonexistent personal income taxes in many states. In those states, much of the income of the very wealthy avoids tax altogether, and there is a larger reliance on more regressive taxes like sales and excise taxes. [Institute on Taxation and Economic Policy]
- Pro-Growth Tax Policy For Working Families: Advocates for tax breaks often paint them as “investments,” with the promise that they will pay dividends in the long run. Often the promise of long-run benefits are overstated, but research shows helping vulnerable children can pay higher returns than almost any other public investment. A great model is the temporary CTC expansion in 2021, which proved to be an incredibly successful anti-poverty program for families with children. [Tax Policy Center]
- About 16 Million Children in Low-Income Families Would Gain in First Year of Bipartisan Child Tax Credit Expansion: The bipartisan Child Tax Credit expansion in the tax bill negotiated by Senate Finance Committee Chair Ron Wyden and House Ways and Means Committee Chair Jason Smith takes an important step toward making the credit work for children in families with low incomes. While smaller than the American Rescue Plan credit expansion that expired at the end of 2021, the proposal’s top priority is getting more of the credit to most of the roughly 19 million children who currently get a partial credit or none at all because their families’ incomes are too low. The bipartisan proposal pairs corporate and small business tax provisions with Child Tax Credit improvements that cost a similar amount, reportedly about $35 billion for each set of proposals. With the exception of a modest indexing proposal, all of the benefits from the Child Tax Credit improvements go to children left out of the full credit because their families’ incomes are too low. [Center on Budget and Policy Priorities]
- About 2 Million Parents and Young Children Could Be Turned Away From WIC by September Without Full Funding: More than two months into fiscal year 2024, Congress has thus far failed to provide the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) with the additional funding needed this fiscal year to avoid turning away eligible young children and pregnant and postpartum adults with low incomes for the first time in decades. WIC’s funding needs have grown due to higher-than-expected participation and food costs. Inadequate funding would force states to put eligible new and expecting parents and young children on waiting lists for nutrition assistance, jeopardizing access to this highly effective program during an important window for child development. [Center on Budget and Policy Priorities]