OKLAHOMA'S tax system is increasingly outdated, inefficient and unfair. That's a statement with which we generally agree. It's also a statement made by a think tank with which we sometimes disagree.
The Oklahoma Policy Institute sees tax policy as an essential component for the state's prosperity. A buzzword used in a position paper released this week by OK Policy is “shared prosperity.” At the federal level, “shared prosperity” is a euphemism for the redistribution of income — taxing the wealthy more to fund programs for those who pay little or no taxes.
The same conclusion can't be reached in Oklahoma, however. Here, all citizens pay the sales tax at the same rate. Most of us pay state personal income taxes. And all of us pay the property tax, directly or indirectly.
OK Policy's prescription for updating the state's tax system is thoughtful and reasonable — which is not to say we agree with all of it. Lower-income citizens do pay too much in income taxes. This needs to be addressed. Oklahomans hit the top rate (5.25 percent) of income tax with earnings of just $8,500 for individuals or $17,000 for households.
Unlike OK Policy, we believe the top rate should be lowered for all citizens, to keep Oklahoma competitive with states with a lower rate or no income tax at all. An easy “fix” for a system that taxes lower-income workers at too high a rate would be to raise the top rate for higher-income Oklahomans and lower it for everyone else. But fairness is inherently missing in that formula. True fairness would tax everyone's income at the same rate: The more you make, the more you pay.
OK Policy's “shared prosperity” agenda seems to hit hard at the middle class by not lowering the top income tax rate for them, by extending the sales tax to services (something that would also hurt the poor) and by eliminating certain deductions. The latter was one of the reasons that Republican-led income tax cut proposals hit a brick wall last year: Average citizens weren't convinced they'd be better off with a lower rate but with fewer exemptions and deductions.
Eliminating the sales tax on groceries is another chestnut given new life by OK Policy. It's a good idea but a non-starter because local governments depend so heavily on the sales tax. Ending the tax on groceries would take a dramatic restructuring of the sales tax system, including the aforementioned tax on services that would constitute a tax hike for the middle class.
As it has repeatedly, OK Policy wants to curtail tax preferences for horizontal and deep well drilling, credits that are keeping the gross production tax at low levels. This deserves scrutiny, but the credits should be viewed in the context of competitiveness with other states that offer them.
Some solid ideas advanced by OK Policy include addressing the disparity between sales taxes paid on purchases made in the state and those made online. Also, we need a responsible approach to cutting taxes that involves dollar-for-dollar spending cuts to offset tax reductions.
In advance of the 2013 legislative session, the state's progressive-leaning think tank has unveiled its recommendations on tax policy. They should be considered with the same measure of thoughtfulness that went into forming them. The same is true of opposing views that will soon surface as, once again, the tax system takes a starring role in policymaking.