| January 5, 2012

Laffer Outlines Plan for Phaseout of Oklahoma Income Tax

On November 29 Dr. Arthur Laffer—the keynote speaker at a joint meeting of three Oklahoma City civic clubs (Kiwanis, Lions, and Rotary)—delivered a forceful and occasionally humorous exposition defending free markets and free people.

Laffer also offered a précis of points made in a new analysis from OCPA in cooperation with Arduin, Laffer & Moore Econometrics (ALME). The study, “Eliminating the State Income Tax: An Economic Assessment,” outlines a proposal to put the state on a 10-year glide path to elimination of the state income tax.

Preston Doerflinger, Cabinet Secretary of Finance in the administration of Governor Mary Fallin, told CapitolBeatOK he has studied the OCPA-ALME paper. Asked for a succinct reaction, he said, “Let’s get it on.”

Professor Laffer pointed to a range of evidence that instructs him that “no matter how you slice it,” states without income taxes perform better than those with the levy. He said removal of the income tax would yield “an immediate boon for Oklahoma.”

Stressing his comments should not be considered partisan or even ideological, the 71-year-old Laffer said he has devoted his career in the study of economics to promotion of policies that work. Advancing lower taxation and smaller government “is not political, and not partisan. It’s good economics.”

He noted that President John F. Kennedy, a Democrat, scaled back significantly the draconian income tax rates that had been imposed during the Great Depression. Nearly two decades later, Ronald Reagan built on the Kennedy model to bring income tax levies still lower, triggering an economic boom that lasted for nearly a decade.

On the flip side, to make his point, Laffer made clear his disdain for the spending policies of both the current president, Barack Obama, and his predecessor, George W. Bush. Laffer contended, “The reason the American economy is in bad shape today is bad policy, not bad luck.”

Laffer reported he twice voted for Bill Clinton, and complimented the former president for lowering government spending, support of free trade, senior tax cuts, and other pro-market reforms.

Among current governors, he had good words for three Republicans—Mitch Daniels of Indiana, Scott Walker of Wisconsin, and Chris Christie of New Jersey—and at least one Democrat, Andrew Cuomo of New York. He also said that Jerry Brown, now governor of his former home state (California), has taken wise steps in terms of restraints on state government employee pension benefits.

As detailed in the study he co-authored with OCPA, Dr. Laffer predicted (in response to a question at the luncheon) that the Sooner State would see higher sales tax receipts due to greater consumer spending as income tax rates come down.

He encouraged policymakers to be bold, and to think of their children and grandchildren. Public policy should “make it more attractive for firms to hire, and for workers to work.”

Laffer observed, “Poor people can’t spend themselves into prosperity.”

Larkin Warner, an emeritus professor of economics at Oklahoma State University, gave Dr. Laffer a warm introduction, saying he had always considered him “primarily an economic educator, teaching us all how excessive taxation can work to the detriment of all.”

Laffer’s speech to the Rotary, Kiwanis, and Lions clubs came in the ballroom atop the downtown Chase Building, in the packed-full ballroom of the Petroleum Club.

Patrick McGuigan (M.A. in history, Oklahoma State University) is editor of

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