THE tax-cut debate at the Oklahoma Capitol appeared on life support last week, and the final outcome is uncertain. Opponents such as the Oklahoma Policy Institute are seeking to mobilize public opposition to any tax cuts. That's certainly the group's right, but some arguments put forth are better than others.
OK Policy notes that Oklahoma's poverty rate is 17.2 percent, the 11th worst in the United States. That's true, but a tax cut is hardly going to make the poor poorer. In fact, given that Oklahoma's top income tax rate kicks in at $8,700 for single filers, it might help them.
OK Policy also points out that state government workers haven't received a cost-of-living increase since 2006. That seems a poor sales pitch to build opposition to a tax cut: You need to accept less take-home pay so a bureaucrat can get more.
The liberal-leaning think tank says state funding for higher education is down compared with five years ago, which OK Policy says has forced tuition and fee increases. But colleges have had tuition-setting power for years now. When legislators have been tightfisted, tuition has gone up. When appropriations surged, well, tuition has still typically gone up. Whether or not a tax cut passes this year, tuition likely will increase.
Other points raised by tax-cut opponents are more reasonable. OK Policy and others note the state budget for public schools has been cut during the recession even as enrollment increased and that the number of state troopers on Oklahoma highways is the lowest in decades.
But the latest tax cut plan, which would lower the rate from 5.25 percent to 4.95 percent in 2015, would reduce tax collections by $169 million. All agencies combined asked for more than $1 billion in new spending this year; the state has only about $200 million extra. Even without a tax cut, agencies will continue to ask for more next year, and history has shown no amount of taxation is ever so great that government boosters won't claim poverty.
Opponents of a tax cut, including legislative Democrats, decry the tax cut plan as providing just $39 per year for a median-income family. Yet if that $39 per family, a collective $169 million annually, can make such a dramatic improvement in government (according to tax-cut opponents), how much more impact would that money have if left in the private sector?
The argument for tax cuts isn't that they will dramatically enrich individuals, but that they will increase the size of the private sector, which allocates money far better than any government agency. That, in turn, creates jobs that actually reduce unemployment, boost wages and lower poverty.
In recent years, total state tax collections have often increased after income taxes were cut — thanks to economic growth that proponents argue is a result of those tax cuts.
Obviously, lawmakers must weigh the need for increased government spending on things like schools, roads and prisons against the need to maximize money in our state's private sector. They ultimately may favor state spending over tax cuts this year, and consider tax cuts again in future years.
Still, given the healthy state of Oklahoma's economy today — after significant tax cuts have been enacted in recent years — it's worth remembering: There are many higher-tax states that would love to trade places with Oklahoma right now.