Skip to comments.Oklahoma Leads on Income-Tax Repeal (The Sooner State Might Join the Ranks of Non-Income Tax States)
Posted on 01/30/2012 6:55:32 AM PST by SeekAndFind
When Ron Paul talks about repealing the income tax and replacing it with nothing, most people think it cant be done. But at least on the state level, it can. In fact, there are nine states, including Pauls home state of Texas, that dont levy income taxes. Those states have far outperformed high-income-tax states on every measure of economic success. Now Oklahoma is poised to fully repeal its income tax and join the ranks of non-income-tax states. While Oklahoma is already a relatively business-friendly, low-tax state, income-tax repeal would launch it into the top tier of the most economically competitive states and the best places to live and work.
The Oklahoma income-tax repeal plan was developed by supply-side guru Art Laffers econometric firm, in partnership with the Oklahoma Council of Public Affairs, the states free-market think tank. Their study found that phasing out the state income tax would more than double personal-income growth, boost the size of Oklahomas economy by more than 20 percent, and create an additional 312,000 jobs over the next decade.
The record is clear. Over the past decade, non-income-tax states have seen 59 percent economic growth, versus just 38 percent for high-income-tax states. Job growth has been 4.7 percent in the non-income-tax states, while high-income-tax states actually lost 2.9 percent of their jobs. Population growth is the same story, up 12.3 percent in the non-income-tax states and just 3.8 percent in the high-income-tax states. Perhaps most interestingly, non-income-tax states are seeing more rapid growth in state and local tax revenue, as the high-income-tax states are undermining economic performance and, as a consequence, depressing revenues.
Oklahoma has been strong economically over the past decade, but has lagged behind Texas in every measure. And while Oklahoma is business-friendly, Texas with no income tax is an attractive option for Oklahoma companies looking to relocate.
The Laffer-OCPA plan starts by replacing the existing Oklahoma income tax, a progressive tax with a top rate of 5.25 percent, with a flat tax that eliminates all deductions, credits, and loopholes. According to the Oklahoma Tax Commission, such a flat tax would have to be set at 3 percent to replace current income-tax revenue levels, but the Laffer-OCPA plan cuts it to 2.25 percent in 2013, and then cuts it by an additional 0.25 percentage points each year, until the income tax is fully repealed in 2022.
These tax cuts would trigger an economic boom that would offset about half the lost revenue from the plan. It would also significantly increase local-government revenues and decrease spending pressures by reducing the number of people enrolled in state-run welfare programs, including Medicaid. While additional spending restraint would be needed to balance the budget during the phase-out period, overall state spending could continue to grow.
The plan already has broad legislative support. It was introduced with 23 cosponsors in the State House as HB 3038. In the past decade, states without a personal income tax outpaced Oklahoma in economic growth and job creation, said state representative David Brumbaugh, a principal author of the bill.
Companion legislation in the State Senate, SB 1587, has four initial sponsors. State senator David Holt explained: We are committed to making sure Oklahomas government delivers on its core missions, but we also cannot ignore the economic growth happening in states without income tax.
State representative Leslie Osborn, another principal author of the bill, added: Our goal is to transform Oklahoma into the best place to do business, the best place to live, find a quality job, raise a family, and retire in all of the United States. Not just better than average, but the very best.
Isnt that what all our elected officials should be focused on? Wouldnt it be great if all of our state governments competed with each other with pro-growth tax, spending, and regulatory policies to attract as much investment and create as much economic growth as possible? Oklahoma legislators are leading the way by putting this aggressive pro-growth proposal on the table. We hope they succeed.
Phil Kerpen is vice president for policy at Americans for Prosperity and the author of Democracy Denied (BenBella Books, 2011). Stuart Jolly is state director for Americans for Prosperity Oklahoma.
No State Income Tax, coupled with the fact that Oklahoma is a Right to Work State should help propel them forward economically in a country that is most definitely, “economically challenged...”
What’s happening in Oklahoma should be happening nationally as well because we will never again be a truly FREE people for so long as we continue to abide the communist inspired, class warfare inducing, income tax and the IRS!
Several years ago Oklahoma also got aggressive about enforcing a crackdown on the hiring of illegal immigrants. Coincidentally, at the same time my state of Arkansas got a new influx of undocumented aliens. Surprising, huh?
There is also a law making its way through the legislature to strengthen our Make My Day laws.
I’d be thrilled if my state (Kansas) would just eliminate the personal property tax. I’m tired of seeing thousands of Kansas residents tagging their vehicles in Texas, Missouri, Oklahoma, Illinois and Wisconsin so they can avoid the high cost of tagging in this state every year. If they’re young adults, they’re using their parents address in other states. If they’re older, they’re using the address of an adult offspring living in another state. It’s a tax based on the honor system and less and less people have honor anymore. I’m tired of being one of those who is picking up the tab for them by abiding by the law.
I’d rather not see this. Oklahoma will become similar to Texas where you can’t afford to live in your own house because the property taxes are so high.
The way it is you have a choice: Income in Texas and little property or property in Oklahoma and moderately taxed moderate income.
I for one am a confirmed Luddite and would rather see a few places around stay closer to the way they are.
This is a bunch of developers grabbing for money now at the expense of anyone who disagrees with them. Folks, the money to do things has to come from somewhere. Budgets do have to fit into the revenue stream but there has to be some revenue stream... you can’t do something with nothing.
Texas may not have an income tax but it has plenty of others in disguise, like the Franchise Tax on Gross Income if you don’t sell goods... all done in the name of not being able to have an income tax. A tax on gross income whether you earn a profit or not.
Well, Well-— I live about an hour east of the OK border in high tax Democratic controlled State of Arkansas. I might just pick up and move and give OK one more physician. I do have Native Amercian cousins in that area of OK. Maybe around Gore where the fishing is good!!!
I wonder what this will do to people who work in OK and work in a neighboring state that does have an income tax. As it stands now, a credit is given for income tax paid to other states. Sounds as if income will be double taxed for these people.