Q&A with Robert Dauffenbach
State’s taxes are low compared
to others in region, study shows
Q: Recent data from the Tax Foundation examines taxes in Oklahoma and surrounding states. Can you provide us with some of those findings?
A: Oklahoma is commonly seen as having higher per person tax collections than Texas. However, per capita, the Tax Foundation study found that Oklahomans paid an average of $2,143 to their state and local governments in comparison to $2,109 in Texas, a $34 difference. For fiscal year 2009 and 2010, state and local taxes were $43 and $69 higher in Texas. Oklahoma appears to have “closed the gap” with Texas.
Q: The Tax Foundation study attempts to account for tax paid by citizens of one state to other states. What sort of tax payments does that highlight, and what do we learn from that?
A: The Tax Foundation study recognizes that taxes on businesses are indirectly paid by consumers. Alaska’s high taxes on oil and gas production are offered as an example. Alaska produces but does not consume much oil and gas, but the tax shows up in the price. Therefore, Alaska exports most of such taxes to consumers in other states. The Tax Foundation attempts to allocate all such indirect business taxes and, thus, estimates taxes paid by citizens of one state to state and local government in other states.
Q: What are the major differences between state and local tax collections in Oklahoma and Texas?
A: Texas relies heavily on the property tax and is estimated to collect, per capita, about two and one-half times the level of property taxes as does Oklahoma. They don’t have an income tax. However, because the value of our houses positively correlates with our incomes, the property tax operates like a quasi-income tax. The difference is that in a recession when incomes drop, so do receipts from the individual income tax. Property taxes are still owed, and, in consequence, are good for government in steadiness of revenues, but less favorable to the taxpayer.
Q: What is the central message that you take from the findings?
A: The central message is that Oklahoma is a low tax state, both regionally and nationally, and can be regarded as having a more equitable state and local tax system. Oklahoma’s state and local tax per capita collections are among the lowest in the seven-state region bordering Oklahoma. In total taxes to both in- and out-of-state and local governments, Oklahomans paid $3,187 in fiscal year 2011, in comparison to $3,088 in Texas, a difference of $99. The highest total taxes in the seven-state region were in Colorado at $4,220 and the lowest in New Mexico at $3,044 in comparison to a national average of $4,216. Oklahoma, Texas, and New Mexico have historically been among the three lowest state and local tax levels in the seven-state region. Oklahoma’s state and local tax system can be argued as ‘fairer’ than that of Texas. Property taxes tend to be regressive, meaning that lower-income households pay a larger share of their income in property taxes. No one, including me, likes to pay taxes, but we have to have the infrastructure of roads, bridges, water and sewage, heath and education systems to be competitive for business location. There are advantages to how we collect revenues in Oklahoma that we frequently fail to consider.
Don Mecoy, Business Editor