Budget & Tax
Leslie Osborn | March 12, 2014
Let’s Reduce Oklahoma’s Penalty on Work
Late last year, the Oklahoma Supreme Court threw out a modest reduction in Oklahoma’s penalty on work—our personal income tax rate—for violating the state constitution’s single-subject rule. While any tax relief is a blessing for many Oklahoma families, the court’s actions may present an opportunity to increase the level of relief—giving state lawmakers a chance to provide a more robust tax-relief plan to help Oklahoma’s economy continue to grow, attracting jobs and prosperity.
For generations, Oklahoma has been losing job creators and job seekers to a more welcoming environment south of the Red River. From 1992 to 2010, Oklahoma lost nearly $1 billion in working wealth to Texas, as people pursued better opportunities there. Tens of thousands of hardworking individuals, business owners, employers, and, yes, taxpayers, left Oklahoma to put down roots farther south.
Why? One reason is that Texas has no penalty on work, no income tax. Even with higher property taxes, Texas still offers a lower overall tax burden than in Oklahoma. Simply put, Texans get to keep more of their hard-earned money. No wonder many of Oklahoma’s best and brightest migrate to Dallas and Houston.
But now, the drain may worsen. In the past two years, Kansas has dramatically reduced its penalty on work, dropping its top income tax rate below Oklahoma’s. And Kansas’ rate is scheduled to fall further—eventually to zero.
In addition, Kansas eliminated income taxes on small-business profits. Already, the Sunflower State is attracting job creators from across state lines.
Dynamic steps by Kansas, combined with constant pressure from no-income-tax Texas, have situated Oklahoma in an awkward income-tax sandwich. To stay competitive regionally—and nationally, and globally—it’s imperative we continue reducing Oklahoma’s penalty on work.
Recently, a group of 10 state legislators, myself included, from the House of Representatives and state Senate introduced a proposal to gradually reduce Oklahoma’s personal income tax rate from 5.25 percent to 4 percent over four years. By 2018, when Kansas’ top rate will be 3.9 percent, we will only be one-tenth of 1 percent behind—in position to keep ahead of other states nipping at our heels.
Those who oppose empowering Oklahoma families and preventing individuals from investing their hard-earned capital as they see fit will predict a great loss of revenue from this proposal. But they’ve been wrong before.
Oklahoma has reduced income tax rates by more than 20 percent since 2005. Yet in the most recent full fiscal year, Oklahoma saw the highest total tax collections in state history, to the dismay of those who said tax cuts would deplete resources for core government services like public safety, roads, and education.
Other states noticed Oklahoma’s positive growth as we steadily reduced our penalty on work over the past decade. They’re doing everything they can to be more competitive with us. Now, Oklahoma is in danger of taking our foot off the gas and shifting into the slow lane. Instead, we should seize an opportunity to provide additional tax relief to Oklahoma families and job creators.
State Rep. Leslie Osborn (R-Mustang) is a member of the Appropriations and Budget Committee in the Oklahoma House of Representatives.