Latest numbers from Finance Secretary Preston Doerflinger show that Oklahomans and their employers have been in a spending mood and an earnings mode. This can't help but bolster arguments for an income tax rate reduction in the 2013 legislative session.
Some will focus on the paucity of receipts from the gross production tax and try to score political points with that information. We'd prefer to celebrate the fact that sales tax receipts hit a record $172 million in December. Personal and corporate income taxes were higher, with the latter significantly higher.
That corporate income tax revenues grew by 21.4 percent last month (compared with December 2011) is more evidence that a natural resource-oriented economy benefits the state even when gross production taxes fall. Revenue from that source dropped by nearly 85 percent as natural gas prices remained in a slump and the state continues paying back drilling tax credits that it had deferred during leaner times.
The sales tax figures were great news for local governments, which depend heavily on sales taxes, and even more significant considering that this is an increasingly service-based economy and Oklahoma doesn't tax most services. Gov. Mary Fallin used the latest numbers to remind Oklahomans that any celebration must be tempered with the fact that state officials don't know how much money Washington will be sending to the states. This caveat is also applicable to the pending debate on state income tax cuts, something Fallin has pushed for in the past.
Depressed gross production tax revenue was largely responsible for total general fund revenues dropping in December by 2.5 percent, despite record sales tax collections and the income tax gains. Taken as a whole, the latest numbers show Oklahoma's economy remains vibrant but not necessarily healthy enough — yet — to justify a significant personal income tax cut.
As was true a year ago, we urge caution in restructuring income tax rates.