| September 1, 2010

Oklahoma's Income Tax: End It, Don't Mend It

Former Arkansas Gov. Mike Huckabee has moved to the Sunshine State. Reportedly, he and wife Janet now have Florida driver’s licenses and have signed Florida declarations of domicile. What on earth happened? A lifelong denizen of the Land of Opportunity, Huckabee departed his favorite duck ponds near Stuttgart for the land of respirators, gators, and humidity.

How could he have made such a switch? Is he addled or suffering from a masochistic form of midlife crisis?

Not really. I suspect that my friend is only responding to incentive—the incentive of being able to keep more of what is yours. To hold on to what you have earned.

Look at the figures. Florida has no income tax. What you toil for is yours. They don’t tax work, they encourage it. Arkansas actively discourages work. They tax it, early and hard. From $0 to $3,700 per year, Arkansas workers cough up one percent to the state. From $31,000 and up, they pay a whopping seven percent of their income to Little Rock.

Mike Huckabee is earning good money and I imagine that he wishes to set aside as much as he can for retirement and his family. We’d all do the same thing. So why doesn’t every state understand the public’s desire to avoid the death squeeze of income taxes?

While I was governor, the economics departments of the University of Oklahoma and Oklahoma State cited Oklahoma’s personal and corporate income taxes as among the reasons why we were poor. They also pointed to welfare, litigation costs to business, academically unchallenged curricula, an inadequate transportation infrastructure, divorce, and the absence of Right to Work as contributing factors to our economic stagnation. With bipartisan action, the Legislature addressed many of those concerns and we rocketed from 45th in per capita income to 38th. All with oil hovering around $18 a barrel.

But we were unable to do much on the tax front. Texas has no income tax. Is it any wonder that last year they created nearly 70 percent of all the private-sector jobs in America? Texas now ranks as the 15th-largest economy in the world and for the first time has more Fortune 500 companies headquartered there than any other state. Our income tax hits early and tries to suffocate workers on the first steps up the economic ladder. From $0 to $100 of income, the rate is 0.05 percent. But from $8,701 and up, it’s a staggering 5.5 percent tax on each person’s wages.

In Washington, the debate is beginning whether we should move from an income- to a consumption-based tax system or a combination of the two. In Oklahoma, we should follow Mike Huckabee to Florida. The debate is over. We should reward work and discourage consumption. We have too little of the former and too much of the latter. The income tax should be abolished, and we could accomplish it all without having to move to Florida.

Frank Keating served as the 25th governor of Oklahoma.

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