David Averill: Tax cut fever
BY DAVID AVERILL Editor, Editorial Pages
Sunday, February 26, 2012
4/16/12 at 12:41 PM
The pungent aroma of tea party is in the air at the state Capitol and the governor and many lawmakers are hell-bent on doing away with the state personal income tax. At least a couple of bills have been filed to do just that.
Here's a suggestion that would let the Legislature get rid of the personal income tax all at once, now, instead of just crippling the state a piece at a time over 10 years or so:
The personal income tax brings in about a third of the state's revenue. Coincidentally, or not, about a third of state spending goes to support common education - elementary and secondary schools.
Just do away with the personal income tax in one fell swoop and then make up the lost revenue by completely ending state funding for common education. The schools could just scratch around for the little dabs of county property taxes available to them and make do with volunteer teachers and 200 kids each in classes held outside on the playgrounds of shuttered buildings.
Let me hasten to say that I really don't advocate such a thing. To do that would be completely irresponsible, more irresponsible even than some of the tax-cut proposals that are surging through the legislative process.
But it serves to illustrate a point that ought to be of concern to every Oklahoman: The Legislature is seriously thinking about reducing state revenue in an amount that is equal to the total it spends on what is arguably the most crucial responsibility assigned it by the state Constitution, namely, the education of Oklahoma's children.
Sure, the proposals would stretch the devastation over about 10 years (although some lawmakers want to do it faster) but in the end the result is the same: The amount of money that the state spends on elementary and secondary schools would be gone from the budget.
Proponents of all of the tax-cut measures claim their bills would protect education and other "core services," and would not require increases in other taxes.
But when they say they are protecting core services, what they mean is they would maintain those services at current, drastically reduced, levels that were brought about by four years of recession and serial tax-cutting. For example, this year's appropriation to the Department of Education is 10 percent, or $254 million, less than it was in 2009, according to the Oklahoma Policy Institute. Higher education and career tech sustained cuts of 6 percent last year alone. Across the board, state agency budgets have been slashed by tens of millions of dollars.
For common schools, passing flat budgets year after year will mean teacher layoffs, larger class sizes, no incentives for teacher improvements and no money for innovative programs to improve student achievement. Rapidly inflating transportation and heating fuel costs and employee health coverage will hammer already skeletal school district budgets.
A bad dream
Gov. Mary Fallin's plan would make up for lost revenue - $114 million or $340 million in the first year, depending on who's estimating - by eliminating 59 tax credits, exemptions and deductions and with millions of dollars in hoped-for revenue growth triggered instantaneously by the tax cuts. That dream is unlikely to come true. There is no credible evidence that cutting state taxes "grows the economy" and triggers revenue growth.
The plan by Sen. Mike Mazzei, R-Tulsa, appears to be the least objectionable. It reduces the personal income tax top rate from 5.25 percent to 5 percent in 2013 and to 4.75 percent in 2014, and it does not finally eliminate the income tax. It also would reduce the corporate income tax rate from 6 percent to 5 percent in 2013, costing the state about $77 million over three years. Still, it would eliminate 32 tax credits and nine exemptions and deductions, including some that are popular with middle- and lower-income taxpayers.
Oklahoma's so-called core services - education, public safety, corrections, transportation and health care but most of all education - have been ravaged by years of national economic recession and serial tax cutting by the Legislature. Oklahoma's economy is slowly recovering and revenues from its three main sources - income, sales and oil and gas production taxes - are beginning to increase.
But the fever to cut the personal income tax almost guarantees that the damage already done to education and the other services will not be repaired soon, if ever.
Original Print Headline: Tax cut fever
David Averill 918-581-8333