Budget & Tax

Rating agencies used as weapons against taxpayers

July 14, 2017

David Autry

Citing a decline in "financial resilience,” Fitch Ratings recently downgraded the ratings on Oklahoma bonds. And earlier this year, both Standard & Poor's Global Ratings and Moody’s lowered their ratings on the state of Oklahoma’s bonds.

Some now want to use these downgrades to justify tax hikes on Oklahoma families and businesses. More and more, the rating agencies are being used as weapons by tax-hungry bureaucrats against taxpayers in states like Oklahoma, Kansas, and Illinois. In Illinois, for example, a rating agency recently endorsed Illinois' 32 percent personal income tax increase instead of focusing on Illinois' unreformed, massive spending problem.

A recent analysis by OCPA shows that these recent downgrades should be met with a healthy degree of skepticism. These rating services have a mixed track record of accuracy, objectivity, and impartiality in bond ratings.

Although we should keep an eye on the lowered ratings, it’s not the doom-and-gloom scenario that some bureaucrats and tax advocates want us to believe. The ratings are still in a high investment grade category and have a stable outlook.

Even State Treasurer Ken Miller noted that since all Fitch did was follow Moody's, it is likely this slight downgrade changes nothing. I would suggest it is just another attempt to weaponize ratings against taxpayers.

Also, a story in The Oklahoman even notes that if the state did issue additional bonds to the level it had in the prior year, over the life it's an increase of $8.4 million more paid in interest. This tradeoff is far better than the $2 billion in tax increases proposed last session which would have further hurt the most vulnerable and crippled Oklahoma's economy.

These downgrades have increased pressure to raise taxes. But rather than raise taxes on Oklahomans who are already hurting due to continued low energy prices, state policymakers would be wise to seek to bolster economic competitiveness, thereby boosting the underlying economy and enhancing future tax revenues.

It’s no secret that Oklahoma is hurting because Oklahomans are hurting. That’s precisely why raising taxes on individuals, families, and businesses that are already struggling to make ends meet is not the best answer.