Cutting income tax is wrong approach for Oklahoma
For months now, we've heard a drumbeat from Gov. Mary Fallin and legislative leaders in favor of reducing the top income tax rate. However, some major stumbles in their push so far show why that's much easier said than done.
The first problem for tax cutters is that the extra money is just not there. State tax collections are at their lowest levels in decades, and we have slashed public services for three years in a row. These cuts have been felt by low-income seniors and people with disabilities who need assistance with meals and utility cost; by teachers and schoolchildren who are crammed into crowded classrooms with fewer resources; and by state employees facing ever-greater caseloads that in some cases put their safety and public safety at risk.
Our long-term needs are just as daunting. We face rising health care costs associated with an aging population. We have substantial unfunded pension liabilities that must be addressed. We face billions in infrastructure expenses to fix our crumbling roads and bridges and maintain safe water systems. On top of all that, deficit reduction efforts in Washington are likely to squeeze the flow of federal dollars to the state.
Because it recognizes the budget has little room to spare, a recent proposal by a legislative tax reform task force tried to offset cuts to the top income tax rate. That's where they ran head-on into the second stumbling block. The income tax is the only major component of our tax system based on ability to pay, so almost any attempt to shift taxes elsewhere will inevitably take more from those who can afford it least.
Two-thirds of the tax credits and exemptions targeted for elimination by the task force don't go to special interests or favored industries. The largest tax benefit slated for elimination is the personal exemption claimed by virtually every Oklahoma household. Another major set of exemptions is claimed by hundreds of thousands of low and moderate-income Oklahomans. Many of these exemptions are meant to offset regressive sales and property taxes, which also would likely increase in any effort to eliminate the income tax.