Continued tax cuts in Oklahoma aren’t fiscally conservative
In crafting their many ― and often conflicting ― tax cut proposals this year, state leaders have consistently talked about being fiscally conservative. They are right in that we do need to be fiscally responsible to prepare for the future. However, the proposals seen to date are missing that mark.
Fiscal conservatism should be characterized by prudent spending (“Are tax-funded programs evidence-based, and do they work?”) and adequate preparation for the future (“How can we make smart spending choices now to avoid higher costs in the future?”).
These considerations are especially important this year, as Oklahoma and the United States are in the midst of immense economic uncertainty. While state revenue is artificially high now, everything from the war in Ukraine to a weaker stock market are contributing to slowing economic growth. Experts say that growth could continue to slow, which could lead to a severe economic downturn, or even a recession. This uncertainty makes it even more important that state leaders make smart, forward-thinking fiscal decisions this year.
Instead, many state leaders have called for large and ongoing tax cuts that will reduce revenue and limit the state’s ability to respond to a potential economic crisis. If new revenue is needed in response to these tax cuts, lawmakers will be hamstrung by State Question 640’s requirements of a three-fourths majority of both legislative chambers, or a majority vote of the people.
This effectively means that once a tax is gone, it is virtually impossible to bring it back. In fact, the Legislature has only met SQ 640’s requirements once in three decades, in response to massive public pressure during 2018’s education protests.
That potential for harm might be understandable, if there was any evidence that cutting taxes pays off. In reality, two decades of steadily cutting taxes has not grown Oklahoma’s economy in any significant way. Continuing this trend of revenue cuts will not have any significant benefit for everyday Oklahomans.
In fact, cutting taxes will have detrimental impacts on most Oklahomans. If state leaders choose to reduce revenue now, and the state experiences an economic downturn in coming years, public programs will be sorely impacted. The public education system ― that serves 90% of Oklahoma children ― depends on state funding. Many health care providers, particularly in rural communities, rely on SoonerCare reimbursements to keep their doors open. Mental health treatment facilities need public dollars to continue serving Oklahomans. When the state’s buying power declines as a result of tax cuts, the vast majority of Oklahomans will feel the squeeze.
Research from the Oklahoma Policy Institute and our national colleagues have shown that most of Oklahoma’s proposed tax cuts would primarily benefit the wealthiest Oklahomans, sending little to no benefit to low- and middle-income taxpayers to whom lawmakers pledged inflation relief before this session started.
Finally, this year offers state leaders a chance to pivot away from a mindset of scarcity that has limited our state’s growth potential. Oklahoma already has the 10th-lowest state and local effective tax rate; so, relative to most others, Oklahoma is already a low tax state.
Simultaneously, Oklahoma drastically underspends on its service to residents, as our state and local per capita expenditures are the fourth-lowest in the nation.
With a bit more fiscal breathing room this year, state leaders have a generational opportunity to identify and leverage resources to address some of the state’s unaddressed needs.
Emma Morris is the health care and fiscal policy analyst for the Oklahoma Policy Institute.
This article originally appeared on Oklahoman: Oklahoma tax proposals are not conservative and miss the mark
