A tax revolution is brewing under the Oklahoma capitol’s dome, and some fear that the building pressure might blow funding for essential state services right out of the state’s budget.
Three tax-specific bills are under consideration. Senate Bill 1623 proposes reducing the top personal income tax rate by one-half percent by 2014. House Bill 3061 proposes establishing a ceiling tax rate of 3.5 percent for single persons making $35,000 or more annually, while establishing the same ceiling for married, head of household, or surviving spouse for income at or above $70,000. Single persons grossing between $15,000 and $34,999, and married couples grossing between $30,000 and $69,999 would cap at 2.5 percent. Oklahomans grossing below those levels would pay no income tax. HB 3061 also allows for an additional one quarter of one percent cut when state revenues increase by five percent or more.
However, it is House Bill 3038 that offers the biggest transformation in Oklahoma’s tax structure. While the aforementioned legislation would counter the reduction in state income with a list of specified exemption repeals, HB 3038 proposes phasing out the state’s income tax with full elimination by the year 2022. The bill also proposes eliminating all tax exemptions except those for volunteer firefighters.
“The reasoning for this bill is two-fold,” says HB 3038 author Leslie Osborn (R-Bethany). “Number one is economic development. Businesses are fleeing the coastline states where they are overtaxed and overregulated. If we phase out the state income tax, we become the state with the lowest overall tax burden at the end of the phase out.”
However, Oklahoma Policy Institute Director David Blatt says such a transformation to the state’s income apparatus threatens the continuation of basic governmental functions. “This really is the wrong path for Oklahoma. You want to be the best educated state in the nation. You want to have the best jobs in the nation. “Frankly,” Blatt continues, “no one has proven that having the lowest taxes in the nation makes you the best in the nation.”
Acknowledging Oklahoma’s overall embracing of small government and low tax philosophies while fighting to maintain quality infrastructure, Blatt adds, “Maybe Oklahoma doesn’t want to be Massachusetts, but it also doesn’t want to be Bangladesh.”
Blatt advocates closing loopholes in the current tax structure to increase the state’s bottom line and guarantee the continuation of essential services. “You’re getting the means and the ends confused,” he says.
Osborn maintains that HB 3038 is a forceful step in the right direction to attracting business and jobs to the Sooner State. “Critics may say taxes do not matter, but they do to job re-locators,” she says. “(Former) Governor Frank Keating said that businesses told him that if he would do two things they would move their jobs here…Right to Work and no income tax.”
“Oklahoma is already a low-tax state,” Blatt argues, adding that business leaders are not pushing for an income tax cut. “We need to be honest and realistic about how we are going to pay for services.”
The fate of the proposed legislation remains uncertain.