Budget & Tax
Trent England | January 4, 2016
Oklahoma’s tax cut and its discontents
Oklahomans have an additional reason to celebrate the new year: a small but significant personal income tax cut became effective January 1, 2016. The Oklahoman explains how the law changed from 2015 to 2016.
More than 1.7 million Oklahoma taxpayers are expected to receive some benefit from this year's initial reduction. Oklahoma's top income tax bracket of 5.25 percent for tax year 2015 applies to individuals who make more than $8,700 a year and couples who make more than $15,000 a year. That top tax rate will drop to 5 percent for tax year 2016 and will apply to individuals who make more than $7,200 a year or couples earning more than $12,200 a year.
While the size of the tax cut is small, it is important for two reasons. First, income taxes are particularly harmful because they penalize work; there are better ways to collect government revenue. Any reduction (and hopefully an eventual phase-out over a 20-year period) of the state income tax is beneficial to Oklahoma’s economy and therefore to Oklahoma families.
Second, government always wants to grow and lacks incentives to control costs. The most practical way to contain government, to limit the power of politicians over citizens, is to restrain its resources. Because government is a monopoly, it lacks incentives to lower costs and increase quality. Keeping taxes low keeps government limited, forcing it to live within its means and hopefully to become more efficient.
Oklahoma’s tax cut does have its critics. Yet experiences in other states show no matter how big and expensive government becomes, there will always be those who demand bigger government and higher taxes. Consider two of the country’s highest tax states: New York and California.
Californians pay some of the highest state taxes in the country, but the California Budget & Policy Center claims the state needs even higher taxes. The liberal group actually suggested there can be no debate over increases in state taxing and spending. “There will undoubtedly be questions about prioritizing among needs, but the larger issue—whether additional tax revenues are critically needed to support eroding state systems—is not really an open question.” (It is a fact, in the wake of California adopting President Obama’s Medicaid expansion, the state’s Medicaid program faces a billion-dollar shortfall this year.)
Similarly in New York, the Fiscal Policy Institute, a state-based liberal policy group, argued last year that Gov. Andrew Cuomo’s proposed $1.1 billion increase in education funding was too small by half. Like California, New York imposes very high taxes on citizens. Yet the Fiscal Policy Institute complained when Gov. Cuomo, a liberal Democrat, proposed property tax cuts for the poor without also proposing “offsetting” tax hikes on other New Yorkers.
Here in Oklahoma, one liberal group lambasted the 2016 tax cut as the consequence of a “leadership failure” and accused tax-cut supporters of cowardice and ignorance. The group, the Oklahoma Policy Institute, is part of a coalition of liberal state groups that includes New York’s Fiscal Policy Institute and the California Budget & Policy Center. There is no reason to doubt the sincerity of any of these advocates for bigger, more expensive government. It is worth noting, however, that even in high-taxing, big-spending states, these voices always call for more.
In spite of the noise, Oklahomans can be proud of their elected leaders for staying the course.
David and Ann Brown Distinguished Fellow
Trent England is the David and Ann Brown Distinguished Fellow at the Oklahoma Council of Public Affairs, where he previously served as executive vice president. He is also the founder and executive director of Save Our States, which educates Americans about the importance of the Electoral College. England is a producer of the feature-length documentary “Safeguard: An Electoral College Story.” He has appeared three times on Fox & Friends and is a frequent guest on media programs from coast to coast. He is the author of Why We Must Defend the Electoral College and a contributor to The Heritage Guide to the Constitution and One Nation Under Arrest: How Crazy Laws, Rogue Prosecutors, and Activist Judges Threaten Your Liberty. His writing has also appeared in the Wall Street Journal, USA Today, Washington Times, Hillsdale College's Imprimis speech digest, and other publications. Trent formerly hosted morning drive-time radio in Oklahoma City and has filled for various radio hosts including Ben Shapiro. A former legal policy analyst at The Heritage Foundation, he holds a law degree from The George Mason University School of Law and a bachelor of arts in government from Claremont McKenna College.