An Oklahoma Republican is proposing a bill that would revise the state government’s “tax trigger” law, raising the revenue level at which the state government is required to reduce income tax rates.
Currently, when estimated government revenues in a two-year cycle equal or exceed the previous cycle’s actual revenue, the maximum rate at which Oklahomans’ income is taxed is reduced. Oklahoma Gov. Mary Fallin (R) signed the law in 2014.
State Sen. Ron Sharp (R-Shawnee) says when the Oklahoma State Legislature convenes in February, he will introduce a bill that would increase the threshold for triggering income tax relief, requiring projected revenue to exceed past revenue by $500 million.
Encouraging Greater Spending?
Trent England, vice president for strategic initiatives at the Oklahoma Council of Public Affairs, says Sharp’s bill is based on a faulty premise.
“The bill to change the trigger for an income tax rate reduction seems based on an assumption that government is too small and taxpayers aren’t paying enough,” England said. “Why else write the bill to encourage state government to spend $500 million more?”
If It Ain’t Broke …
Jonathan Williams, chief economist for the American Legislative Exchange Council, says Oklahoma lawmakers should avoid weakening the tax trigger system.
“The current policy of giving hardworking Oklahoma taxpayers a tax reduction when revenues are higher than expected is sound in its approach,” Williams said. “It helps ensure politicians don’t simply find new ways to spend surplus revenues. The tax triggers also reduce income tax rates and make Oklahoma more competitive. All taxes harm growth, but an overwhelming amount of evidence shows state income taxes—on both personal and corporate income—are the most damaging.”
Cost of Corruption
Williams says government corruption and cronyism have led to decades of financial mismanagement and waste.
“The Oklahoma state government has plenty of money, but the system was set up and run for nearly a century by people who believed in the ‘good ole’ boy style’ of patronage politics,” Williams said. “It was designed to be inefficient, a fact many Republicans have a hard time wrapping their minds around. Ending or reducing subsidies to wind-energy corporations could provide over $100 million [in savings]. Legislators should also shift resources from higher education toward basic education, including teacher pay.”
Cut Now, Cut Later
Williams says lawmakers should cut wasteful spending.
“The short-term answer is to demand efficiency from the most inefficient parts of state government, particularly our higher-education bureaucracies. Eventually, Oklahoma needs leaders who look further ahead and work to change how we do government there, cutting needless programs, consolidating duplicative bureaucracies, and making it all far more transparent and accountable.”