DID you know that 0.25 percent of $1 million yields more than 0.25 percent of $30,000? Did you know that people who don’t owe state income tax don’t get any direct benefit from a cut to a tax rate they don’t pay? Those facts are obvious to most Oklahomans, yet opponents of tax cuts act as though these are startling new revelations.
Gov. Mary Fallin has called for cutting Oklahoma’s top income tax rate from 5.25 percent to 5 percent. Predictably, opponents immediately resorted to class warfare arguments. David Blatt, with the Oklahoma Policy Institute, said 41 percent of Oklahomans would see no benefit from Fallin’s tax cut and individuals in the middle class would receive about $30. However, the top 1 percent of taxpayers would save more than $2,000.
Well ... yes. People who pay little or no income taxes don’t suddenly pay less than zero when tax rates are lowered. But nearly six in 10 Oklahomans do pay income taxes. Given that Oklahoma’s top tax rate kicks in at $8,700 in taxable income for single filers and $15,000 for couples, this group includes many who clearly do not share the lives of the “idle” rich.
It’s also true that the more money you earn, the more money you save when the tax rate is cut. That’s just basic math. This doesn’t mean the rich are getting a bigger tax cut than the middle class. The rate reduction would be the same for both. Instead, it means the rich have more money than the middle class and pay more in taxes, which isn’t breaking news. They will pay more in taxes regardless of the rate.
Rep. Scott Inman, a Del City lawmaker who leads the House Democratic caucus, said Fallin’s tax cut proposal was “laughable and clearly demonstrates that the governor is focused more on the politics of selling a tax cut to a right-wing base that wants it than she is based upon actual fiscally responsible policy.”
Again, given the low income levels landing people in Oklahoma’s top income tax bracket, those interested in a rate reduction are not merely an insignificant or overly partisan sliver of the state population.
Given the state’s budget situation, and the backlog of needs that accrued when lawmakers had to cut spending during the national recession, we’ve questioned whether a tax cut should be on the front burner this year. Fallin’s proposed budget illustrates the trade-offs that must occur to cut the tax rate while balancing the budget at a time of revenue decline. In general, though, low income tax rates encourage successful people to live in a given state. Neighboring Texas, an economic engine for the nation, has no personal income tax.
We’ve also agreed in principle with OK Policy’s contention that the top income tax rate shouldn’t kick in as such low-income levels. Rather than painting the rich as undeserving beneficiaries of tax cuts, why not make sure more lower-income people aren’t taxed at the highest rate?
To their credit, both OK Policy and Inman also advance solid arguments to justify increased spending in certain areas rather than enacting a tax cut. If they want to do more than provide sound bites, they should focus on rational, policy-based arguments — not crass appeals to class division based on a mathematical sleight-of-hand.