In the debate over cutting Oklahoma's income tax, opponents have claimed a cut will force increases in other rates, such as state sales taxes or local property taxes, to make up the difference. Those critics should look to California to see what happens when policymakers try to “soak the rich” to maintain “vital” government services.
California's income tax and sales tax rates are already higher than Oklahoma's. California's sales tax rate is 7.25 percent and its top income tax rate is 10.3 percent, compared with 4.5 percent and 5.25 percent, respectively, here.
If tax rates are as irrelevant to business decisions as local tax-cut critics claim, you'd think California government would be rolling in money now while Oklahoma would be reduced to the government-finance equivalent of siphoning gasoline out of a neighbor's car. In reality, California's in trouble. And Oklahoma is doing far better than most states.
Because of California's tax and regulatory policies, Chief Executive magazine's annual survey of CEOs placed the Golden State last in the nation in a ranking of state business climates. Oklahoma was 17th. California's tax collections are 20 percent below projections, creating a multibillion-dollar budget hole.