The conventional wisdom-peddled by tax consumers and amplified by a largely sympathetic news media-says that, because of income-tax cuts signed into law in 2004, 2005, and 2006, Oklahoma's individual income tax revenues are declining.

If that's the case, someone forgot to tell Brad Henry. Because according to the governor's own budget books, individual income tax revenues are not falling. They are rising.

Let's take a look at what's happening with income tax revenues.

Let's start with individual income tax revenues for the last year that actual data are available (FY-2007). We're looking here at actual collections, not estimates by the governor, the state treasurer, or others whose recent estimates have not exactly been renowned for their reliability.

The state Board of Equalization would have you believe the number for total individual income tax collections for FY-2007 is $2,337,689,693.1 But in fact, the real number is $3,413,564,946.2

This reflects a 23.87 percent increase in total collections3 from FY-2006 to FY-2007, despite (or because of) the fact that FY-2007 saw what was at that time the biggest tax cut in Oklahoma history take effect.

Why isn't the truth being told?

Well, first of all, finding the truth about tax revenues isn't easy unless you know where to look. Journalists, by and large, are not number-crunchers, and they're not philosophically inclined to do reporting which would challenge the assumptions of the big-government crowd.

Moreover, even your average accountant would have trouble finding these numbers. I had to do some real digging to uncover them. After hearing the constant refrain about "declining revenue collections," I took the time to look through the governor's budget books of the last several years. Buried in the obscure Schedule D at the very end of the historical-data budget book, I found the number for personal income tax revenues.4 As I mentioned above, this number for FY-2007 is $3,413,564,946.

Now the question is, why does this $3.4 billion get reduced to the $2.3 billion that the politicians and bureaucrats cite for public consumption? Where did these billion-plus dollars go?

Here's what happens. Before individual income tax revenues become available for appropriation, several groups get a piece of the pie. For example, the Oklahoma Teachers Retirement System has been removing money at an increasing rate from the state's coffers to support its obsolete and underfunded pension plan. From FY-2005 to FY-2008 the funds removed from individual income tax, corporate income tax, sales tax, and use tax revenues have increased by 33 percent as politicians threw bones-and your money-to their union supporters. In FY-2008 propping up this archaic pension plan will take 5 percent of your income-tax payments.

And the education establishment doesn't stop there. They also help themselves to an additional 8.34 percent of individual income tax revenues. Again, this is before the appropriations process begins.

And it's not just the education establishment. The biggest pre-appropriations "split-off" actually comes courtesy of the Quality Jobs Act tax credits and other tax credits that have been enacted over the years. These amounts are conveniently left out of the Board of Equalization numbers.

In short, before legislators ever sit down to appropriate money to state agencies-to divvy up the pie-some folks have managed to sneak into the kitchen and help themselves to several pieces of the pie. These several pieces add up to more than a billion dollars. And just because these dollars are not available to appropriate doesn't mean they haven't flowed to the state treasury. They have flowed to the state treasury, and they've been flowing in increasing amounts.

Repeat: Individual income tax revenues are not falling. According to Gov. Henry's own budget books, they are rising.

Endnotes

1. Board of Equalization packet, Itemized Estimates of Revenue schedule, February 2008.
2. Governor Brad Henry, FY-2009 Executive Budget Historical Document, Appendix D, February 4, 2008, http://www.ok.gov/OSF/documents/bud09hd.pdf.
3. Ibid.
4. Ibid.

OCPA research fellow Steve Anderson (MBA, University of Central Oklahoma) is a Certified Public Accountant with more than 20 years experience in private practice. He previously spent two years as an analyst in the Oklahoma Office of State Finance.