When the Oklahoma State Legislature begins session in early February, legislators will be wrestling with a multitude of tax proposals, including one aimed at repealing Oklahoma’s individual state income tax. The individual income tax represents 32 percent of the state’s total revenue from tax collections, and is the largest single source of funding for health care, transportation and other essential state services.
Proponents of the proposal argue the change is necessary for Oklahoma businesses to effectively compete with neighboring states, but losing the revenue from individual income taxes could have disastrous consequences for Oklahoma’s economy and for OPEA’s members.
According to the Oklahoma Policy Institute, Oklahoma has a lower unemployment rate than six of the nine states without a state income tax. Losing the revenue from the income tax could actually stall economic recovery in the state. Moreover, Oklahoma is already a “low tax, low services” state, since Oklahomans pay 20 percent less in state and local taxes than the national average. Without the revenue provided to the state by the individual income tax, other taxes would have to increase, or core services, personnel and infrastructure will likely face more cuts.
“Oklahoma has already lost 3,000 state employees since 2008,” said OPEA Executive Director Sterling Zearley. “If if the state loses the revenue from the personal income tax, it would be very difficult for state agencies to maintain their current staffing levels, and pay raises would be completely out of the question.”
State employees, already paid 20 percent below market, have gone without pay raises since 2006. While the state’s economy is recovering from the recession, state officials anticipate a flat budget for 2012, which means the state’s agencies must continue to do more with less.
“State employees work hard to provide quality services for Oklahomans,” Zearley said. “These services are essential to securing a prosperous future for our state.”
Over the past year, the Oklahoma Policy Institute made several presentations to state officials about the importance of the individual income tax to Oklahoma’s overall economic well being, and they will continue to monitor the issue as the legislative session gets underway this spring. Oklahoma Policy’s fact sheet, “8 Reasons Why Oklahoma Should Preserve the State Income Tax,” provides a brief overview of specific arguments for preserving the status quo. More in-depth reports and articles can be found on OK Policy’s website, which can be found on OPEA’s homepage.
“The state income tax will be a critical issue during this legislative session,” said OPEA Policy and Communications Director Trish Frazier. “State employees need to learn about this issue, and they need to be sure to contact their legislators about this.”
Frazier said OPEA will work hard to keep members informed throughout session, and she said she hopes members will register for OPEA Day at the Capitol, which will take place on Tuesday, April 10th.
For more information on Oklahoma’s income tax and other public policy issues, be sure to visit the Oklahoma Policy Institute.