Earlier this month, rival events on the income tax debate presented an illuminating contrast. OK Policy’s forum featured economists from Oklahoma public and private universities, as well as economic development experts from the state Department of Commerce and the OKC, Tulsa, and State Chambers of Commerce. These experts from across Oklahoma’s academic and business community shared the message that eliminating the income tax would not live up to the promises of tax cut boosters and could be a disaster for the state.
At the same time, the Oklahoma Council of Public Affairs (OCPA) brought speakers from outside of Oklahoma to push for tax cuts. OCPA’s event featured an anti-tax activist from Missouri, the Kansas budget director (who is a former OCPA fellow), and a representative from a Washington D.C. think tank. Their blog response to the Oklahoma economists’ critique was done by an economist from the Show-Me Institute, Missouri’s version of OCPA.
The contrast raises an important question: who is behind the push to eliminate the income tax? It’s not coming from Oklahoma economists or the state’s business community. The state and major metro chambers’ reactions have ranged from ambivalence to outright opposition. It’s not coming from the grassroots. Multiple lawmakers, Republicans and Democrats alike, have said they are not hearing from constituents that we should do away with the income tax.
So where is it coming from? It’s no coincidence that very similar efforts to eliminate the income tax are popping up in Kansas and Missouri. All three campaigns rely heavily on a report by Arthur Laffer, a former Reagan advisor who has dedicated his career to restricting taxes in numerous states. Governor Fallin mentioned Laffer’s numbers in this year’s state of the state speech, though she cited them as coming from Americans for Prosperity, a national lobbying group founded by David and Charles Koch. Most recently, Governor Fallin wrote the introduction for a report by Laffer and others at the American Legislative Exchange Council (ALEC) that ranks states based on how closely they follow ALEC’s economic policy agenda. It’s clear that these national groups have the governor’s ear.
But besides Governor Fallin and a few state legislators, it seems the only champions of this proposal are on the payroll of OCPA or out-of-state advocacy groups. The Wall Street Journal (where Stephen Moore, a partner in the firm that produced the Laffer report, is an editorial writer) wrote that this multi-state effort represents a “heartland tax rebellion.” A better description might be a heartland tax invasion. We’ve been drafted into a national effort against the income tax, regardless of whether it is the right fit for Oklahoma.
That’s troubling, because for several reasons the assault on income tax is clearly the wrong fit here. Property tax is by far the most unpopular tax in our state, and our property taxes are very low. That means local governments must rely heavily on sales tax, and Oklahoma’s sales tax rates are comparatively high. Raising taxes on oil and gas extraction is also unlikely. Meanwhile, underfunded core services are already falling behind our needs in many ways.
That’s why those who understand Oklahoma know that we have no good alternative to the income tax. Lawmakers should listen to the Oklahoma experts, not outside groups making big promises.