| November 15, 2012

State tax collections continue to climb

General Revenue Fund collections in October grew at double the rate of the previous month -- and exceeded the official estimate by nearly 10 percent, according to a press release from the Oklahoma Office of State Finance.

Individual income tax receipts -- at $186 million -- were 7.6 percent higher than they were in October 2011, and sales tax receipts -- at $153.5 million -- were 4.4 percent higher than they were at this time last year.

The numbers this month -- while impressive -- are actually nothing new; they simply continue a trend that essentially began when a small reduction in the income tax rate took effect in early 2011.

As OCPA fiscal policy director Jonathan Small has pointed out, a reduction in tax rates followed by growth in revenues teaches us something useful and, well, obvious: A reduction in tax rates can actually lead to growth in revenues.

Still, that's not the reason we at OCPA advocate the gradual elimination of the state income tax. To put it as simply as possible: We want citizens to enjoy the fruits of their labor. Eliminate the income tax and Oklahoma families suddenly have more of their own money at their disposal -- to save for children's college education, perhaps, or for retirement. College tuition costs in our state have exploded in the past two decades -- and the costs of retirement aren't what they used to be, either.

It's important to remember that simple principle -- that we ought to be able to capture the economic gains we produce -- because arguments for revenue-neutral tax reform proceed apace. In a recent editorial, for example, The Oklahoman board insisted offsets must be part of any effort to reduce the income tax, "Citizens are in no mood for a tax cut based solely on hoped-for economic scenarios," the board wrote.


Meanwhile, citizens are certainly in no mood for new taxes or for tax increases, as The Oklahoman board pointed out in a separate editorial:

Some members of the education establishment insist that public demand for increased school funding now exceeds support for lower taxes. This year's election results suggest otherwise.

State Question 758 limited property tax increases and State Question 766 exempted intangible property from taxation. School officials opposed both measures, saying they reduced education funding. Oklahoma voters overwhelming approved both anyway.

It's not that Oklahomans don't value government services, particularly education. It's that we continue to internalize this truth: More spending doesn't always mean better service, particularly in the realm of education. To perform its core functions well, state government doesn't need more revenue -- or even necessarily all the revenue it receives now.

The first question to ask is not, "How much revenue does the state government need to perform core services?" The first question to ask is, "What are the core services of state government?"

If state legislators take up that question before they attempt to find offsets to accommodate income tax reform, they might very well find they don't need the offsets at all.

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