Tax system will have starring role in Oklahoma policy agenda

The Oklahoman Editorial Published: January 24, 2013

OKLAHOMA'S tax system is increasingly outdated, inefficient and unfair.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.

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