Oklahoma Must Eliminate the Penalty on Work

September 2, 2014

Tom Newell

This month OCPA Impact is spotlighting a state lawmaker who is helping to drive the conversation in Oklahoma about reducing our penalty on work, the state income tax. Tom Newell (R-Seminole) represents District 28 in the Oklahoma House of Representatives, where he is chairman of the Human Services Committee.

Recent headlines tell a story Oklahomans already know: Texas is a prime destination for job creators from across America.

During the Great Recession, over half of all new U.S. jobs were created in Texas. Since the recession, Texas has seen more job growth than any state but North Dakota. Now Toyota, the world’s largest automaker, is moving its U.S. headquarters from California to Plano, a Dallas suburb.

With additional jobs coming from Toyota’s Kentucky and New York facilities, Texas is expected to gain 4,000 jobs.

In the 50-state competition for growth and opportunity, states charging no personal income tax are winning. Texas and Florida, two income tax-free states, are among America’s biggest winners.

Oklahoma has experienced a relatively stable economic upswing the past dozen years. We became a right-to-work state, reduced our income tax by 25 percent, and benefited from energy producers who sparked the shale revolution. And we’ve seen some recent in-migration from Texas.

But this doesn’t balance out the gains Texas has experienced from Oklahoma over decades.

From 1992 to 2011, Texas saw a net gain of $1.3 billion in personal incomes from Oklahoma taxpayers who moved south of the Red River.

Skeptics say once Oklahomans move south, income tax savings are gobbled up by higher property taxes. But when you consider differences in income tax rates, property tax payments, and per capita income between the two states, the average Oklahoma worker would save roughly $2,095 a year by moving to Texas.

For employers, the savings is often greater. Decisions made by these individuals impact job opportunities and pathways to prosperity for thousands of people.

If an employer moves from the coast to the heartland, they won’t settle for a state with a 5 percent penalty on work. They’ll send the moving trucks to Dallas, Houston, or Austin — not Oklahoma City or Tulsa.

Numerous other employers, including Occidental Petroleum, Motorola, and Dropbox, have announced plans to relocate to or expand operations in Texas. And last year, in rental car giant Hertz’s exodus from New Jersey, more than 100 executive-level positions shifted from Tulsa to the company’s new Florida headquarters.

In the recent merger between Office Depot and OfficeMax, we learned that 120 workers in Norman will be laid off, their jobs resurfacing in Austin.

These join the homegrown jobs and capital that left Oklahoma years ago for Texas in pullouts by Conoco, Phillips Petroleum, Kerr-McGee, Noble Energy, and others.

Interstate tax competition affects lives. It impacts the ability of fathers and mothers to provide for their families, geographically separates parents from adult children and young grandchildren, and leads to economic shifts that result in prosperity in certain regions and anxiety in others.

Even with no state income tax, Texans and Floridians still fund schools, roads, prisons, and safety nets for the less fortunate. They do it by attracting more taxpayers.

To better compete for Oklahoma’s future, we must continue to work toward responsibly eliminating our penalty on work.

OCPA Impact is the only organization working every day at the Oklahoma Capitol during the legislative session as an advocate for taxpayers on issues of free markets and limited government. To join our action alert network, visit www.ocpaimpact.com.

By State Rep. Tom Newell