Oklahoma leaders should prioritize state’s investments
The legislative special session this fall focusing on tax issues came and went without action. But Oklahomans who are concerned about the state’s ability to prosper should remain wary of future attempts to further eliminate state revenue through poorly targeted tax cuts.
Most Oklahomans share a vision for a state in which hard work leads to individual and community well-being; a state that supports growing companies and attracts new ones; a state that promotes and encourages innovation. This version of Oklahoma depends on strong public schools, well-maintained infrastructure, broadband internet in every home, child care to allow more folks to work, and accessible workforce training so all residents can secure good, well-paying jobs.
To create this ideal future, Oklahoma needs robust public investment. Recently, however, some elected officials have called for eliminating the personal income tax, or about one-third of the funding for the shared services that turn this vision into a reality. Rather than cutting our way to the bottom, lawmakers must protect vital revenue and leverage tax dollars to improve quality of life for all Oklahomans.
Becoming a “top 10 state” will require strategic investments of the revenue from the personal income tax. For Oklahoma to shine on the national stage, we will need to make sustained investments in public education, workforce development, infrastructure, technological development and more.
Oklahoma currently ranks as the 41st worst state for business, but this is decidedly not because of a high tax rate. In fact, Oklahoma ranks third best for the cost of doing business — the measure that accounts for taxes. We also score well (21st) on business friendliness, which accounts for regulation and bureaucracy.
Our ranking tanks because we score miserably low in other areas: education (48th), technology and innovation (38th), workforce (36th), and economy (30th).
To improve these rankings, state leaders must find ways to increase the number of residents with college degrees or industry certifications, enhance job growth, and better support public education. All of this relies in some way on public investment.
And yet, many state leaders have called for reducing or eliminating the personal income tax, which last year provided $3.4 billion — or about 1 in 3 dollars — for the state’s General Revenue Fund. Without the personal income tax, Oklahoma would have billions less to spend each year on the very public services we need most to be economically competitive and keep our communities safe and healthy.
Replacing that revenue would be virtually impossible. If lawmakers eliminated the personal income tax completely, it would take significant increases in sales taxes, property taxes and taxes on services to offset the amount now collected through the personal income tax.
The other significant hurdle is Oklahoma’s supermajority requirement to raise revenue due to State Question 640. If lawmakers eliminated the personal income tax, it’s likely they would then be unable to pass a bill to replace that lost revenue.
We’ve been down this road before. Oklahoma lawmakers from both political parties have reduced the state’s personal income tax eight times since 2004, most recently in 2021. Simply put, tax cuts simply haven’t given Oklahomans the economic boost we were promised.
If Oklahoma leaders are serious about supporting current and attracting new businesses, choosing to reduce the General Revenue Fund by $3.4 billion without a viable plan to replace that revenue would cause irreparable harm. Without the ability to provide vital shared services, we will see significant harm to the state’s long-term fiscal health and economic growth.
Rather than racing to the bottom, Oklahoma leaders should prioritize investments in things that will take us to the top. Sustained investments in our people and our communities will support existing Oklahoma entrepreneurs, while attracting new business as well. Cutting the income tax — while perhaps politically helpful for some politicians — will not.
Emma Morris is the health care and fiscal policy analyst for the Oklahoma Policy Institute.