Unhappy returns: Ending tax ‘loophole’ not a good approach

THE OKLAHOMAN EDITORIAL Modified: April 15, 2010 at 4:15 am •  Published: April 15, 2010
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A "little bit of an uptick” is how state Treasurer Scott Meacham described March revenue collections, which were higher than they were in the comparable month of 2009. But two consecutive months of positive revenue news doesn’t a recovery make. Along with the Oklahoma Policy Institute’s David Blatt, we’ve been urging lawmakers to use the downturn to find sensible new sources of revenue (such as ending or capping ineffective tax credits) and to better prepare for the next downturn.

As Tax Day 2010 approached, Blatt offered an idea that would generate $118 million a year in additional revenue — more than what the state took in from personal income taxes last month. Blatt proposes closing a "loophole” in state tax policy that allows taxpayers to deduct, on their state returns, what they’ve paid in state income taxes, a deduction they’ve already taken on federal returns.

Oklahoma is one of only six states to allow this; New Mexico recently eliminated the double deduction. Blatt says the policy benefits a small number of wealthier taxpayers. Ending it would have no affect on the three in four taxpayers who take the standard deduction. But it would increase the burden for one in four taxpayers.

That alone is reason to urge caution — especially considering that some states (most notably Texas) have no income tax and Oklahoma’s maximum personal income tax rate is uncomfortably high at 5.5 percent.

It’s not a good idea to punish the successful in a state that needs more successful people.


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