Law & Principles
Jonathan Small | July 20, 2023
Lawmakers must ensure fairness for all Oklahomans
Jonathan Small
The fallout from the U.S. Supreme Court’s 2020 ruling in McGirt v. Oklahoma continues today. A recent federal court decision declaring Indians to be exempt from city police enforcement of municipal laws in local courts in Tulsa is just the latest example.
That issue is being appealed and many other issues are winding their way through the court system.
Rather than avert their eyes, Oklahoma lawmakers should prepare by pre-emptively addressing potential fallout. Among the best tools available are “trigger” laws that declare anytime an Oklahoman of American Indian descent is exempted from a state law or regulation, that law will be repealed for all other Oklahomans.
It is especially important that lawmakers approve a trigger law for the personal income tax.
In McGirt, the U.S. Supreme Court declared the Muscogee (Creek) Nation’s Oklahoma reservation was never formally disestablished for purposes of federal major-crimes law. That ruling has since been expanded to include other tribes whose historic reservations cover an estimated 42 percent of Oklahoma.
In one notable case now before the Oklahoma Supreme Court, Alicia Stroble basically argues American Indians living in McGirt areas are now exempt from paying state income tax.
Stroble was employed by the Muscogee (Creek) Nation in tax years 2017 to 2019, but her residence is on private land not held in trust for a tribe. Under longstanding precedent that means she must pay state income tax.
But Stroble—with the support of several tribal governments—argues that because her privately owned home lies within the Muscogee (Creek) Nation’s historic reservation lines, an area that includes most of Tulsa, she no longer has to pay state income tax.
A ruling in Stroble’s favor would open the door for thousands of other individuals in eastern Oklahoma to claim similar exemptions based on Indian heritage. That could impact state revenue by more than $70 million annually.
That’s why lawmakers should pass a law that says if American Indians are exempted from state income tax, the tax will be automatically repealed for all Oklahomans.
This might require greater reliance on other taxes, primarily sales tax, although not necessarily. The increased economic growth created by whole-state repeal of the income tax would generate replacement revenue, and past studies have shown full income-tax repeal does not automatically require tax increases elsewhere.
Also, the sales tax is among the least susceptible to the McGirt exemption argument. Thus, this proposal would ensure fairness by subjecting all Oklahomans to the same taxes.
McGirt is a major headwind to business growth in eastern Oklahoma. Repeal of the personal income tax is a way to make lemonade out of otherwise very sour lemons.
Jonathan Small
President
Jonathan Small, C.P.A., serves as President and joined the staff in December of 2010. Previously, Jonathan served as a budget analyst for the Oklahoma Office of State Finance, as a fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and as director of government affairs for the Oklahoma Insurance Department. Small’s work includes co-authoring “Economics 101” with Dr. Arthur Laffer and Dr. Wayne Winegarden, and his policy expertise has been referenced by The Oklahoman, the Tulsa World, National Review, the L.A. Times, The Hill, the Wall Street Journal and the Huffington Post. His weekly column “Free Market Friday” is published by the Journal Record and syndicated in 27 markets. A recipient of the American Legislative Exchange Council’s prestigious Private Sector Member of the Year award, Small is nationally recognized for his work to promote free markets, limited government and innovative public policy reforms. Jonathan holds a B.A. in Accounting from the University of Central Oklahoma and is a Certified Public Accountant.