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Counterpoint: Scrapping tax won’t help economy


Mickey Hepner February 1st, 2012

Few public policy myths have been as persistent as the one that espouses the elimination of the state’s personal income tax as the key to enhancing Oklahoma’s economy. As a result, it appears that this myth is about to have its day.

In the last few months several legislators joined with the Governor’s Task Force on Economic Development to urge Oklahoma to gradually eliminate the state’s personal income tax over the next 10 years. Consequently, it would not be a surprise if legislators will be asked to vote on the idea.

Unfortunately, the evidence indicates that eliminating the personal income tax will not benefit the Oklahoma economy or Oklahoma families.

While the plan’s proponents claim that eliminating the personal income tax would help Oklahoma to better compete with Texas, the latest economic data shows that Oklahoma is already competing just fine. For example, over the last 10 years, Oklahoma’s per capita real gross domestic product has grown at the 15th fastest pace in the nation and faster than six of the nine states lacking a personal income tax.

During the same time period, Oklahoma’s per capita personal income has grown at the 11th fastest pace in the nation — again faster than six of the nine states lacking a personal income tax.

Best of all, Oklahoma’s median household income has grown at the fourth-fastest pace in the nation, and faster than all states lacking a personal income tax. Furthermore, with each of these metrics the Oklahoma economy is beating Texas.

Eliminating the personal income tax won’t benefit most Oklahoma families, either. To offset the lost revenue, state officials will be forced to raise other taxes (as the Governor’s Task Force suggested). However, these other taxes — primarily sales and property taxes — shift the tax burden more onto the poor and middle class.

For example, according to the nonpartisan Institute on Taxation and Economic Policy, the middle-income quintile in Texas — the middle class — faces a tax burden (taxes as a percentage of income) that is nearly three times the burden faced by the highest-earning 1 percent. The poorest quintile fares even worse, with a tax burden more than four times the level paid by the highest-earning 1 percent. Such a transition would hardly be good news for Oklahoma families living dayto-day, week-to-week and paycheck-topaycheck.

The more one examines the evidence, the more it seems that instead of Oklahoma trying to be more like Texas, perhaps Texas should try to be more like Oklahoma.

Read Jonathan Small's argument "Phase out state income tax."

Hepner is dean of the College of Business Administration at the University of Central Oklahoma.

Opinions expressed on the commentary page, in letters to the editor and elsewhere in this newspaper are those of the author and do not necessarily reflect the opinions of ownership or management.

 
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