Tax-elimination talk ignores huge state needs
BY DAVID BLATT
Saturday, January 07, 2012
1/07/12 at 4:19 AM
Imagine you're a family that is barely managing to pay the bills during these tough economic times (Of course, this might not require much imagination if you are one of the thousands of Oklahomans out of work or struggling to get by.) Your house urgently needs a new roof and furnace. In the not-too-distant future, you face major expenses to send your kids to college and care for your ailing parents.
In these circumstances, the last thing you would do is decide that your family's principal wage-earner should quit his job or cut back her hours at work. But faced with similar circumstances in the world of state finances, this is precisely what some Oklahoma elected officials are suggesting in their calls to eliminate the state income tax.
Because of the recession and income tax cuts passed in the mid-2000s, Oklahoma tax collections are at their lowest levels in decades. The state has slashed basic public services each of the past three years.
These cuts have caused major problems for our teachers and schoolchildren, who are crammed into crowded classrooms and offered fewer courses and activities; for hard-working police officers, prison guards and other public servants, who face ever-greater caseloads and responsibilities that put their safety and public safety at risk; and for those who count on the public safety net to help them through hard times.
With the economy improving, we may see modest funding increases next year, but not nearly enough to make up for what has been lost or pay for the normal rise in the costs of doing business.
Oklahoma's long-term fiscal outlook is even more daunting. We face rising health-care costs due to an aging population. We have substantial unfunded pension liabilities that must be addressed. We face billions in infrastructure expenses to fix our crumbling roads and bridges and maintain safe drinking water and wastewater systems.
The situation will be made even more challenging by federal cutbacks that will squeeze the flow of dollars to the state from Washington. At the same time, our tax base is being narrowed by an ever-expanding array of exemptions and loopholes.
Faced with these challenges, should we be cutting or even eliminating our largest revenue source? The state income tax provides one out of every three dollars of support for education, transportation, public safety and other services we all depend on.
Those who support eliminating the income tax say it will be a boon for our economy. But that doesn't ring true: Oklahoma's economy already outperforms most other states, including those with no income tax. Without the resources to educate our students, train our workforce, and fix our transportation system, we will not be a state where businesses choose to invest and individuals choose to raise their families.
What's most disturbing about the proposal to cut the income tax is that it is being promoted without any serious effort to assess Oklahoma's overall finances. No one is trying to figure out how much it will cost to pay our teachers, fix our roads, cover our pension commitments and provide care for vulnerable children, seniors, and people with disabilities - much less offering a credible proposal for how we're going to pay for these obligations.
Instead, the suggestion is to cut taxes ever further and wait for our challenges to solve themselves.
This gamble is not a fiscally responsible course, and it is not the path to prosperity. Rather than risk our economic health on a big roll of the dice, we need to get serious about meeting our obligations to this generation and the next in a fair and sustainable way.
David Blatt is director of OK Policy, a state policy think-tank (okpolicy.org).
David Blatt: We need to get serious about meeting our obligations to this generation and the next in a fair and sustainable way.