Editor, The Transcript:
Well, it’s official now. In her State of the State message, Gov. Fallin confirmed that she hopes to reduce the state income tax now and totally eliminate it later. Big mistake, for two compelling reasons.
First and most obviously, such action would knock a gigantic hole in the state budget. About one-third of the state’s revenue comes from the income tax — around a billion dollars a year.
So how would the governor replace those dollars? By eliminating some 40 different tax credits, mostly those that benefit low- and moderate-income working families. And that step clearly won’t be enough to overcome such a severe shortfall in state revenue. Prepare for Draconian cuts in service or big increases in consumption taxes that hit average working families the hardest.
The ostensible purpose of such drastic changes is to improve the state’s business climate. That’s the common argument from the political right: Take care of the well-off, and everyone benefits. Trickle down, or Voodoo economics, if you prefer.
Abundant studies show that business and industry pay almost no attention to a state’s tax structure. It’s way down the list of items they value in a prospective location. A skilled and productive work force, access to transportation and quality of life are all far more important.
And there’s no evidence that a very modest personal income tax has the slightest negative effect on the incentive to work. Again, a favorite trope of right-wing ideologues that has no basis in fact.
The second fundamental problem with abolishing the income tax has to do with fairness. State and local taxes are notoriously regressive — a sort of Robin Hood in reverse. They take a bigger cut from the paycheck of middle Americans than they do from the wealthy.
With income inequality in this country at perhaps an all-time high, it would surely be wrong to further shift the state tax burden from the well-to-do to those who have less. Ordinary Oklahomans deserve better than this.
In short, the idea that eliminating the state income tax will actually bring more business to Oklahoma has no factual support. And abolishing the source of one-third of the state’s revenue would make the tax structure in Oklahoma even more unfair and would surely be destructive to vital state services.
DAVID R. MORGAN