Some Oklahoma lawmakers are proposing to renege on previously scheduled tax-relief measures that started earlier in 2016 as a way to deal with a projected $1.3 billion state budget shortfall.
State Sen. Mike Mazzei (R-Tulsa) is proposing returning the state’s top income tax rate to 5.25 percent, after it was lowered to 5 percent at the end of 2015. Mazzei’s bill, if signed into law, would void any scheduled income tax relief if the state government’s actual revenues miss projected levels. Voiding the scheduled tax relief would generate enough additional revenue to patch over about 10 percent of the state’s projected deficit.
The proposal was approved by the Oklahoma Senate Finance Committee in February.
Read My Lips …
Jonathan Williams, vice president of the American Legislative Exchange Council’s Center for State Fiscal Reform, says lawmakers who break promises to taxpayers make their state less attractive.
“Whenever you’re dealing with tax cut phase-ins, government is basically making an implicit promise to the taxpayer, saying, ‘We’re going to give you future tax relief,'” Williams said. “If Oklahoma starts to set a precedent that whenever times get tough, we’re going to pull back promised tax relief, it certainly messes with investors and other people looking to bring investment capital into Oklahoma … they see that the rug may be pulled out from under them whenever things get tight in the budget.”
Living Within the State’s Means
Williams says Oklahoma legislators should look to actions taken by lawmakers in Washington State as an example of how to best deal with budget problems that might happen immediately after tax cuts go into effect.
“The Democratic governor came together with a bipartisan group of legislators and said, ‘Our economy is too weak for a tax increase, so we need to tighten our belts, just like moms and dads do around the kitchen table, or small business owners do every day,'” Williams said.
“They made the agencies come up with a mission statement, … why they exist and what success looks like. They made agency heads prioritize all of their programs. On a bipartisan basis, they cut over $2 billion without raising a dime of taxes.”
Calls Tax Hikes Unnecessary
Trent England, vice president for strategic initiatives at the Oklahoma Council of Public Affairs, says Oklahoma can balance its budget without resorting to tax hikes or service cuts.
“[The] Oklahoma State government still spends money covering losses on golf courses and paying for purely local priorities, like rodeos and festivals,” England said. “State agencies spend money on fancy advertising campaigns and branded merchandise. Beyond the most obvious areas to cut, many government processes are far less efficient than what goes on in the private sector. It may be unfortunate, but it usually does take a budget downturn to force government agencies to cut costs and find efficiencies. Of course, in the competitive private sector, this is how people operate every single day.”
England says government agencies seek to grow and advance their own self-interest, rather than do what is best for taxpayers.
“Every government program creates at least two interests,” England said. “One is the group of people who work within that program and the other is the program’s beneficiaries. The loudest voices are usually those of school superintendents and university administrators, probably because any hard look at the budget is going to raise questions about the high salaries and growing numbers of administrators within the education bureaucracy.”
England says Oklahoma is at a turning point.
“Critics of the tax cut, who made fun of it for being small, now insist it must be repealed,” England said. “The real debate is over the direction [of the] Oklahoma State government: Are we going to have smaller, more efficient government or bigger, more intrusive government?”
Michael Bates ([email protected]) writes from Tulsa, Oklahoma.