Budget & Tax

Tax Foundation critiques ‘Step Up Oklahoma’ tax plan

January 24, 2018

Patrick B. McGuigan

The Tax Foundation, a well-known nonprofit that studies fiscal policy across the United States, has issued a critical analysis of the combination of tax changes and tax increases advanced over the past two weeks by Step Up Oklahoma.

The foundation said the envisioned changes would make the state tax system "more complex and progressive, not simpler or more neutral."

Erica York, analyst for the national organization, wrote the “new proposal in the state of Oklahoma would increase state income tax collections by $175.7 million.” She said, “The proposal would make several changes to the structure of Oklahoma’s personal income tax, resulting in some families seeing tax cuts and others seeing tax increases.”

York reviewed envisioned changes that include a cap on itemized income tax deductions, creation of additional tax brackets, reductions in standard deduction amounts, and disallowance of the personal exemption.

While “two lower intermediate brackets would reduce tax liability, they would also add more complexity and progressivity to the state’s income tax structure,” she wrote. “If adopted, this proposal would give Oklahoma eight income tax brackets as opposed to its current six brackets. A nonrefundable, per-return tax credit would also reduce tax liability for certain families, she wrote.

“The remaining components of the proposal would result in tax increases, as they subject more income to taxation. Capping itemized deductions would likely increase tax liability for higher income earners, as high-income earners tend to itemize rather than take the standard deduction.

“Reducing the standard deduction, then, would primarily affect lower income earners and likely lead to more households having income subject to the tax. Disallowing the personal exemption would likewise make more income subject to the tax.”

Her analysis came in a January 18 review of proposed state tax changes entitled “Oklahoma Considering Income Tax Changes to Address Budget Shortfall.”

Brent Gooden, a public relations specialist who is working on the Step Up drive, did not respond to several emails and telephone calls, including a message on his cell phone, asking for a response to the Tax Foundation critique.

State Rep. Kevin Wallace (R-Wellston), chairman of the House Appropriations and Budget Committee, did not respond to repeated attempts to obtain his reaction to the Tax Foundation's assessment.

John Tidwell, state director of Americans for Prosperity-Oklahoma, told this reporter: “We have serious concerns over the proposed changes to our state’s income tax structure. Just last month the President signed the most sweeping tax reform plans in three decades, and now some at the state capitol want Oklahoma to be stuck on the sidelines and forced to pay higher rates.

“This could really slow the real economic growth that the rest of the country is set to see. What’s more, the changes to the state tax code will likely make our tax structure far more complex and not as simple as it could be.

“Now is not the time for us to consider raising taxes. We must get control of our state budget and work to get spending under control, not raise taxes just to grow government.”

On the organization’s website, the Tax Foundation is characterized as “the nation’s leading independent tax policy nonprofit. Since 1937, our principled research, insightful analysis, and engaged experts have improved lives through smarter tax policy.”

A member of the Oklahoma Journalism Hall of Fame, Patrick B. McGuigan is founder of CapitolBeatOK, an online news service, and editor of The City Sentinel, an independent newspaper. A state-certified schoolteacher in 10 subject areas, he is the author of three books and editor of seven, and has written extensively on education and other public policy issues. Investigative journalist Stacy Martin contributed to this report.