| June 18, 2013

Income-tax-sandwich watch

Oklahomans focused on the final days of our legislative session may have missed the news from south of the Red River. Texas legislators were also winding up their legislative session (they only meet every other year), and the last bills they sent to Gov. Rick Perry included a $1 billion tax cut for business. The Texas state budget was so flush that they also voted to allocate $2 billion from the state Rainy Day Fund for water development, and to restore recent budget cuts.

Those folks on the other side of the river long ago figured out that the key to economic and job growth is limited government and restrained taxation. That’s why Chief Executive magazine has ranked Texas best in the nation for nine consecutive years as the top state for business, and why even in a recession Texas was creating more jobs than any other state.

Former Gov. Frank Keating used to point out that Texas and Oklahoma were more similar than different, with nearly identical climates, land, and natural resources. The difference, he stressed, was in the size, scope, and cost of government. Happily, Oklahoma legislators are getting on board the economic growth train, but the latest news from down south reminds us that there is still a lot to do to make Oklahoma as growth friendly as the state we like to call Baja Oklahoma.

Meanwhile, to our north, Kansas Gov. Sam Brownback is telling people, “I don’t want to lose people to Texas. I want to beat Texas.” Gerald F. Seib of The Wall Street Journal reports:

Kansas Gov. Sam Brownback has two goals: to reduce his state’s income tax to zero and to compete with Texas in attracting jobs.

He’s started down that path by convincing his state legislature to cut the state’s top income tax rate from 6.45% when he came into office two years ago to 4.9% now, and to 3.9% by 2018, under terms of a bill he plans to sign this week.

And though many inside and outside his state are skeptical Kansas can keep going without inviting severe budget problems, Mr. Brownback thinks it still can reach his goal of zero. “I think we can, I really do,” he said in an interview on “The experiences in some other states have been that when you cut income taxes, your sales tax increase more than makes up for your income tax cut.” …

Mr. Brownback noted that Texas is a state with no income tax that has attracted an influx of new citizens and taxpayers as well as new businesses — a model he wants Kansas to follow, even though it lacks Texas’ large base of oil and gas tax revenues.

Oklahoma Gov. Mary Fallin is on record saying “Oklahoma doesn’t want to end up an income-tax sandwich.” And yet, that is precisely what is beginning to happen.

Loading Next