On
Nov. 29, 2011, the Oklahoma Council of Public Affairs and Dr. Art
Laffer, an economic adviser to President Ronald Reagan, released the
findings of a new research study. If Oklahoma were to phase out its
income tax over a 10-year period without raising any other tax rates or
burdens, Oklahoma would have the lowest tax burden of any state except
Alaska. The impact on family budgets would be significant, providing
Oklahomans with the following approximate savings (based on 2010 data)
in state personal income taxes:
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.
