For a single person with a gross income of $30,000, the savings would be $950. For a family of four with a gross income of $50,000, the savings would be $1,373.
In order to responsibly phase out the personal income tax, three steps must be taken:
In the first year, clean up the tax code by eliminating all personal deductions, exemptions, credits and loopholes. This allows for a revenue-neutral rate reduction from 5.25 percent to 3 percent.
Next, in the same year, reduce from 3 percent to 2.25 percent the personal income tax rate. This “costs” only about 6 percent of current state appropriations, which is easily found in waste, inefficiencies and non-core spending.
According to a SoonerPoll survey last year, more than half of Oklahoma’s likely voters think “Oklahoma’s state government wastes a lot of money we pay in taxes.” As someone who has served as a budget analyst in the state House and in the Office of State Finance, I can assure you that waste is widespread.
Next, reduce the rate .25 percent every year until the income tax is gone, all the while responsibly funding government and giving taxpayers much-needed relief.
Based on the study’s findings, Oklahoma could expect the following economic impacts:
—An annual increase in personal income. By 2022, personal income in Oklahoma would be $47.4 billion, or 20.6 percent, larger than it would be without the tax reform.
—An annual increase in state gross domestic product. By 2022, state GDP would be $53.4 billion, or 21.7 percent, larger than it would be without the tax reform.
—An increase of 312,000 more jobs in Oklahoma than would have been created without the tax reform.
The competition for jobs and entrepreneurs is fierce, and those states with no income tax and with the lowest overall tax burdens consistently outperform the high-tax states, the national average and Oklahoma. These states lead all others in terms of economic growth, job growth, population growth, and even state and local tax revenue growth.
Oklahoma has the opportunity to be the best place for economic opportunity, and it is an opportunity we cannot afford to miss.
Read Mickey Hepner's counterpoint "Scrapping tax won't help the economy."
Small, a certified public accountant, is fiscal policy director at the Oklahoma Council of Public Affairs, a free-market think tank.