Tax-heavy budget plan highlights stark choices

O KLAHOMA’S $878 million shortfall can be addressed primarily in one of two ways. Either lawmakers can cut spending to match tax collections, or they can increase taxes and fees.

A proposed budget unveiled by roughly 20 specialinterest groups in the “Save Our State” coalition highlights the harsh reality involved with emphasizing the tax increase method.

The coalition’s budget plan would raise taxes dramatically, financially hitting virtually all Oklahomans.

The coalition’s plan proves that taxing “the rich” alone won’t do the trick, unless you define all Oklahomans as “rich.”

The plan includes some interesting ideas and measures we have supported, such as raising the cigarette tax or fuel tax. But it includes far more.

The plan calls for more than $1 billion in total tax increases. Advocates mostly highlight a dramatic increase in taxes on oil and gas production, as well as a 20 percent increase in the income tax rate for those earning more than $200,000. (That would give Oklahoma a higher top income tax rate than even Massachusetts.)

But the plan also calls for hundreds of millions in tax increases even on people of modest means.

The coalition endorses $19 million in tax increases by limiting itemized deductions, which would penalize many small-business owners and middle-class families with children. The plan calls for decoupling the state standard deduction from the federal standard deduction, because Congress may raise (and perhaps double) the federal deduction. Decoupling would therefore ensure even lowermiddle-class families in Oklahoma pay a higher effective state tax rate.

Another $100 million would come by eliminating the capital gains deduction. Among other things, that would increase taxes on Oklahoma farmers and ranchers raising livestock at a time when beef prices have dropped significantly.

The coalition’s plan endorses $166 million in sales tax increases by taxing many services for the first time and reducing or eliminating exemptions. That proposal includes taxing delivery, installation and repair services, which would financially hit much routine activity. The delivery/repair tax alone would increase all Oklahomans’ tax burden by $59.8 million.

Another $151 million would come from higher fuel taxes.

And that’s just the beginning. The coalition calls for additional tax increases in subsequent years. As we said, it’s a stark contrast. Oklahomans have to decide if they believe state government programs provide sufficient value to justify paying more of one’s salary to state government every week, if not every day, in ways big and small.

We also caution lawmakers, once again, to consider the ultimate impact some tax increases can have on private-sector job growth. During the Obama administration, tax increases and greater government spending were touted as an economic cure-all.

But as former U.S. Sen. Phil Gramm and Michael Solon recently noted in The Wall Street Journal, “Federal revenues were supposed to rise by $650 billion over the following decade because of the Obama 2013 tax increase. They are now projected to fall by almost five times that amount because economic growth continues to falter.”

Put simply, tax increase plans like the SOS Coalition’s proposal may not only increase the tax burden, but also fail to fund government.