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This Week from OK Policy
Everyday Oklahomans will be hurt by sweeping revenue cuts: Oklahoma should be a place where all residents have equal access to public services, and where public dollars are spent in pursuit of meaningful, statewide well-being. However, when elected officials like Gov. Stitt call for the elimination of the personal income tax — the state’s largest revenue source that provides more than one-third of the funding for those services — the state cannot meet the needs of its citizens. Rather than continuing to cut our way to the bottom, Oklahoma should protect vital revenue and leverage tax dollars to improve quality of life for all Oklahomans. [Emma Morris / OK Policy]
2022 Census data: Oklahoma remains among the nation’s poorest states; policy solutions can help reverse this trend: Data from the Census Bureau’s 2022 American Community Survey released Sep. 14 show that Oklahoma’s poverty rate was 15.7 percent, which was the nation’s 8th highest. The national poverty rate in 2022 was 11.5 percent, and Oklahoma’s ranking among states remained unchanged compared to 2021. The data show that poverty is especially concentrated for Oklahoma’s children with 19.5 percent, or almost 1 in 5 children, living at or below the federal poverty level. [Gabriela Ramirez-Perez & Sabine Brown / OK Policy]
Refreshing to see bipartisan work on capital needs for regional, rural universities (Capitol Update): An encouraging piece of bipartisan work will occur in the form of an interim study to help assess the capital needs for regional and rural universities. [Steve Lewis / Capitol Update]
Policy Matters: Ways to celebrate Hispanic Heritage Month: Immigrants have been integral in weaving our nation’s vibrant tapestry – a tradition that continues today as this week marks national Hispanic Heritage Month (Sept. 15-Oct. 15). Census data show more than 1 in 10 Oklahomans are Hispanic, the state’s fastest-growing demographic. This month, we can find many ways to celebrate and honor the contributions of our Hispanic friends and neighbors. [Shiloh Kantz / Journal Record]
CLOSES TODAY | Legislative Priorities Survey: We are asking Oklahomans to complete an online survey about the important issues facing our state. Survey responses will help shape legislative priorities for OK Policy and Together Oklahoma during the coming legislative session and beyond. [Complete Online Survey]
Weekly What’s That
Balanced Budget Amendment
The Balanced Budget Amendment (BBA) is a proposed amendment to the United States Constitution that aims to constrain federal spending by various means, including prohibiting annual federal outlays from exceeding receipts.
BBA legislation has been introduced regularly in Congress since the late 1970’s. but has never reached the two-thirds support in both chambers needed to pass. Proponents have also worked to adopt resolutions in enough states to convene an Article V Constitutional convention on the subject. Twenty-eight of the 34 states needed to convene a constitutional convention have adopted a resolution to that effect as of 2017, according to the Center on Budget Policy Priorities.
One version of the Balanced Budget Amendment, introduced by Senators Mike Crapo and Jim Risch in 2021, included the following provisions:
- Require the President to submit a balanced budget;
- Require Congress to pass a balanced budget;
- Restrict federal spending to 18 percent of the Gross Domestic Product;
- Require two-thirds majority votes in the House and Senate to raise taxes; and
- Require a new three-fifths majority vote in both houses of Congress to raise the debt limit.
Exceptions to the BBA in cases of wartime or other national emergencies would require supermajority approval.
Supporters of the Balanced Budget Amendment argue that it is essential to impose fiscal discipline on Congress and control the growing national debt. Opponents emphasize that prohibiting Congress from operating deficits would lead to longer and more devastating national recessions.
Quote of the Week
“Are we going to close schools? Are we going to undo the recent teacher pay raises? Are we going to tax oil and gas and businesses more? Are we going to close hospitals? Are we going to raise property taxes? These are all questions the governor needs to answer directly to Oklahomans instead of just sending out an ambiguous special session call.”
-Senate Pro Tem Greg Treat, responding to the governor’s call for eliminating the personal income tax [Oklahoma Senate]
Editorial of the Week
Special session not place for tax cut discussions
Oklahoma legislative leaders are not enthusiastic about Gov. Kevin Stitt calling the Legislature back to the Capitol next month for a special session on taxes. Specifically, Stitt is pushing to eliminate the state income tax. No replacement tax is proposed, just elimination of the state income tax.
As a tactic toward zero income tax, Stitt is proposing a “trigger law” that would eliminate the income tax for all Oklahomans if a court rules any residents don’t have to pay that tax due to their race, heritage or political classification.
At issue is ongoing litigation over whether tribal citizens are exempt from paying state income taxes in certain situations. In a case before the Oklahoma Supreme Court, a Muscogee Nation citizen is asking to avoid paying state income taxes because she lives and works on her tribe’s reservation in Oklahoma. It’s one of many cases pending in the courts seeking clarity following the U.S. Supreme Court’s landmark McGirt ruling.
Stitt has a solid argument that Oklahomans should not be exempted from paying state income tax because of their race or ethnic status. That, absolutely, would not be fair or proper. However, if courts rule that the McGirt decision applies to more than just the original issue of criminal prosecution, the impact will be huge and affect far more than just income taxes paid by Oklahoma tribal members — although at an estimated $200 million or less that’s not a trivial amount.
Stitt’s proposed “trigger law” is based on a hypothetical situation, a final court ruling that does not exist. A hypothetical problem is not a good reason for a special legislative session.
Eliminating 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.
Furthermore, cutting out the state income tax without any replacement tax would mean cutting out a huge amount of state services. What programs would get the axe? Funding for schools? Highway improvements? Prisons? Health care for the needy? Law enforcement? There are no great answers on what to cut, and Stitt isn’t talking about the inevitable service cuts that would come with tax cuts.
Certainly the idea of paying less income tax is appealing to Oklahoma voters. But, the special session agenda at this point appears packed with political appeal but lacking practical common sense.
Numbers of the Day
- $34-$78 billion – The amount of new sales needed annually if the state were to use sales tax to replace revenue lost by eliminating the personal income tax. That would roughly equate to every adult and child in Oklahoma generating between $8,500 and $19,500 in new spending every year. [Legislative Office of Fiscal Transparency Report, Page 23] | [OK Policy]
- 20,000+ – Total number of Hispanic-owned and operated businesses in Oklahoma [Greater Oklahoma City Hispanic Chamber of Commerce]
- 12.4% – National poverty rate for children, up from 5.2% the previous year when pandemic relief programs such as the expanded federal Child Tax Credit were still in effect. State level data will be released later this week. [NPR]
- 180,000 – Estimated number of children living in Oklahoma households that were food insecure at some point during the past year, which is about 1 in 5 Oklahoma children. [KIDSCOUNT]
- 61.7% – Homeownership rate for American Indian/Alaska Natives in Oklahoma, which is below the state average of 65.5%. The highest rate of homeownership in Oklahoma is for white residents at 70.1%, while the lowest is for Black residents at 39%. [Prosperity Now]
What We’re Reading
- States Should Protect or Raise Revenue as Uncertainty Looms: States should avoid additional short-sighted tax cuts, reversing or at least trimming recently enacted ones, and enacting policies to raise revenues where possible. That way, their revenue systems and the vital public services they support will be better prepared for a rocky economic road that could lie ahead. [Center on Budget and Policy Priorities]
- Key facts about U.S. Latinos for National Hispanic Heritage Month: National Hispanic Heritage Month, which begins each year on Sept. 15, celebrates U.S. Latinos, their culture and their history. Started in 1968 by Congress as Hispanic Heritage Week, it was expanded to a month in 1988. The celebration begins in the middle rather than the start of September because it coincides with national independence days in several Latin American countries: Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica celebrate theirs on Sept. 15, followed by Mexico on Sept. 16, Chile on Sept. 18 and Belize on Sept 21. Here are some key facts about the nation’s Latino population by geography, and by characteristics like language use and origin group. [Pew Research]
- Record Rise in Poverty Highlights Importance of Child Tax Credit; Health Coverage Marks a High Point Before Pandemic Safeguards Ended: The number of people with incomes below the poverty line in 2022 rose a sobering 15.3 million, new Census data show, reflecting the expiration of pandemic relief programs including the expanded Child Tax Credit. The poverty rate for children more than doubled from a historic low of 5.2 percent in 2021 to 12.4 percent in 2022, erasing all of the record gains made against child poverty over the previous two years. Progress made in 2021 in narrowing the glaring differences between the poverty rates of Black and Latino children compared to white children was largely reversed. [Center on Budget and Policy Priorities]
- Young Children and New Parents in Every State Could Be Turned Away From WIC or Have Their Benefits Cut Under Pending Appropriations Bills: Funding in fiscal year 2024 Senate and House appropriations bills for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) falls far short of what is needed to provide all eligible families who apply with the full nutrition assistance benefit. Across the states, these proposed funding levels would result in WIC turning away 600,000 eligible new parents and young children, and the House bill would sharply cut benefits for another 4.7 million. Congress must ensure that the final appropriations bill fully funds WIC to avoid eligible families losing access to the program’s critical benefits. [Center on Budget and Policy Priorities]
- The Unequal Costs of Native American Homeownership: Using the confidential Home Mortgage Disclosure Act (HMDA) data from 2018 to 2021, we document disparities in interest rates and rate spreads on home loans between American Indian and Alaska Native (AIAN) borrowers living either on or off federally recognized reservations and White borrowers. Consistent with past research, we find large raw interest rate and rate spread disparities, especially for on-reservation AIAN borrowers. These rate disparities are largely driven by the disproportionate use of home-only loans, which are not tied to real property. While on-reservation AIAN borrowers are more likely to have leasehold interest in the underlying property, property interests alone cannot explain the greater reliance on home-only loans by on-reservation AIAN borrowers. We find that living closer to a manufactured home dealership is highly correlated with a greater likelihood of securing a home-only loan, but this factor, along with distance to a city and stated preferences about trust in the banking system, cannot account for the differential rate of home-only loan usage between AIAN and White applicants. [Federal Reserve Bank of Minneapolis]