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Author of Oklahoma income-tax-cutting plan criticized

A researcher says there's no evidence the proposal would lead to economic growth and instead could lead to lower wages. Gov. Mary Fallin, meanwhile, is working on her own proposal to reduce Oklahoma's personal income tax rate.
BY MICHAEL MCNUTT Published: December 3, 2012

Harsh words criticizing the author of a plan this year to cut Oklahoma's top personal income tax rate by more than half and eventually eliminate it isn't causing a state group to shy away from the proposal.

Arthur Laffer was selling snake oil to the states in his policies that he suggested the past five years to the American Legislative Exchange Council, a nonprofit, conservative group that develops model legislation to state legislators, according to a study released last week. Some of those ideas were incorporated in the income-tax reduction plan Laffer prepared last year for the Oklahoma Council of Public Affairs, a conservative think tank.

Laffer's ideas were developed in two bills considered this year by Oklahoma lawmakers. They and three other income-tax cutting measures failed to win approval.

‘Poor piece of work'

A study by Good Jobs First, a Washington-based nonprofit aimed at promoting accountability in economic development and smart growth for families, said Laffer's proposals fail to promote stronger job creation or income growth. They actually end up worsening economic conditions, said the study's author, Peter Fisher, research director of the Iowa Policy Project.

Fisher, in a telephone interview, said he followed up on studies Laffer cited in his proposals and found that he “was grossly misrepresenting what those studies found.”

“One of them wasn't even about the individual income tax at all, it was about the corporate income tax,” Fisher said. “The other one actually found that the income tax had no effect on population growth and they didn't even look at whether it affected growth in jobs.”

Fisher called the information he prepared for the American Legislative Exchange Council “a pretty poor piece of work.”

He said Laffer, an economist who first gained prominence as a member of former President Ronald Reagan's economic policy advisory board, overstates the benefits of reducing or eliminating the personal income tax.

“There's no evidence it's going to lead to growth and there's pretty clear evidence that these kinds of policies actually if anything produce lower wages, lower incomes,” Fisher said.

Defending Laffer

Jonathan Small, fiscal policy director for the Oklahoma Council of Public Affairs, defended Laffer's policies and said that pro-growth policies work.

Michael Carnuccio, the group's president, said in October that the Oklahoma Council of Public Affairs has been preparing new research with Laffer “as we continue to build the case for Oklahoma becoming the next no-income-tax state.”

Laffer's proposal in Oklahoma sought to cut the state's top personal income tax rate of 5.25 percent by 3 percentage points next year down to 2.25 percent. Two bills that included that language passed legislative committees; one measure passed both Houses, was scaled down and then failed to advance.

Gov. Mary Fallin, who had her own plan to reduce and gradually eliminate Oklahoma's personal income tax, is staying out of the fray, but still is interested in reducing the personal income tax, a spokesman said.

“In general, she continues to believe that the lower the income tax rate is the more economic growth and job creation we'll see in Oklahoma and that in turn will lead to more revenue,” said Alex Weintz, Fallin's communications director.

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