As reported in state Treasurer Ken Miller’s January Oklahoma Economic Report, their mission was to emphasize the positive performance of the state’s economy to officials of the three main bond rating agencies. Oklahoma’s general obligation bond ratings were already relatively high, but even higher ratings would mean lower future borrowing costs. For example, this would mean lower costs for a proposed bond issue to repair the dilapidated state Capitol.
On Feb. 14, an editorial in The Oklahoman reported that Moody’s rating service had refused to raise the state’s bond rating. Moody’s reasoning included concern over the volatility of energy prices, especially that of natural gas.
The rating firm also noted the push to reduce and abolish the state personal income tax, along with the basic difficulty the state has in raising taxes.
Reduction and/or elimination of the personal income tax has been a major proposal before this year’s legislative session. Supporters emphasize the favorable impact on economic growth and the simplification of the system. Opponents criticize the assumed impacts on economic growth and are concerned about the less well-to-do and possible major contractions in state government services.
As we watch the continuing dialogue on this proposal, we all need to be aware of a very significant change in the state’s Constitution as a result of a vote on State Question 640. Adopted in 1992, that measure effectively declared that any “revenue bill” must be approved by “three-fourths of the membership” of both the state House and the state Senate, along with gubernatorial approval. Another way that a revenue bill can be approved is by a vote of the people at the next general election.
I testified last fall before the Legislature’s Task Force on Comprehensive Tax Reform. There, I emphasized the importance of being very sure about a tax cut because in a year or so Oklahoma cannot easily turn around and say “Uh, oh. We cut too deep and need to implement a corrective increase.”
State House Speaker Kris Steele recently pointed to the presence of SQ 640 and urged a responsible approach to cutting the state personal income tax. The Tulsa World on Feb. 24 quoted Steele as saying that with SQ 640 in place, there is a “slim-to-none” chance of future voter approval of a tax increase if tax cuts dramatically hurt state revenue.
We may each judge for ourselves the chances of three-quarters of the Legislature supporting a tax increase, or of such a measure being approved by a vote of the people in a general election.
Warner is a former Oklahoma State University professor who served as director of the Economic Studies Division at the Kerr Foundation.