Gov. Mary Fallin and legislative leaders have announced a plan for future tax cuts in 2015 and 2016 that primarily benefit the wealthiest Oklahomans and will cut money available for schools by millions of dollars in coming years.
It’s an irresponsible plan in today’s uncertain economic environment and can easily be seen as part of the GOP strategy to “starve the beast” of government funding through incremental tax cuts. Neighboring Kansas, which cut taxes recently and is now facing major budget problems, wasn’t mentioned in the announcement.
On Tuesday, as expected, Fallin, House Speaker T.W. Shannon, R-Lawton, and Senate President Pro Tempore Brian Bingman, R-Sapulpa, announced they had reached an agreement on the future tax cuts. Under the plan, the top rate would drop from 5.25 percent to 5 percent in 2015, and then to 4.85 percent in 2016. The second cut is dependent on revenue growth in 2016 that is equal to or greater than the amount of lost revenue.
Besides mostly Democrats and the Oklahoma Policy Institute, a state think tank, there appears to be no real emerging opposition to the tax-cut plan at the Capitol. Republicans now hold super majorities in both the House and Senate. A press release issued by Fallin’s office said the cuts and two other measures dealing with workers’ compensation and state buildings have been “identified as having the support of both the governor and majorities in the House and Senate.”
As I’ve written before, the futuristic tax-cut plan lacks basic logic. Why not simply wait until next year, gauge the economy and incoming revenues, and then decide on a tax cut for 2015? This plan, if passed, will tie the hands of legislators next year if there’s a major drop in revenues. How many Republican legislators would ever vote to rescind a tax cut?
According to media reports, the cuts would reduce state revenue by $237 million annually if and when they go into effect. This comes right after a time period in which education funding in Oklahoma has faced massive cuts. The cuts also don’t address unneeded tax credits that lower state revenues each year.
The cuts would mean an $88 to $140 annual savings for the average Oklahoma taxpayer, according to one media report, but because it’s a flat, regressive cut state residents with the highest incomes will pay thousands less each year. The question becomes if an $88 tax cut is worth lowering the quality of life here through inadequate education funding.
Fallin claims the cuts will “boost our economy and help us to create more jobs and bring more businesses to Oklahoma,” but what businesses besides oil and gas companies are going to locate here when our educational systems are so vastly underfunded?
Kansas is still grappling with recent tax cuts that could eventually lead to a $1 billion shortfall by 2018, according to some estimates. If that’s what most Oklahoma Republicans want for our state, then they should simply argue for it and not spend time covering their tracks with sweeping and outdated GOP myths about tax cuts.
In response to the plan, OK Policy issued a statement that argued it would “commit us to tax cuts two years from now, when we have no way of knowing what Oklahoma’s needs or economic situation will look like.” The organization also issued a call to action to “stop these irresponsible tax cuts” through a letter drive to legislators.
The tax cut plan, according to the release from Fallin’s office, also includes $120 million in funding to repair and renovate the state Capitol building, which is a worthy endeavor. But the potential, long-term cost to educational and other vital services caused by inadequate funding is simply more important despite the Capitol’s obvious symbolic value. In fact, it would make more logical sense to NOT cut taxes at all until the Capitol is renovated and education funding is restored.
The other two measures contained in the announcement would change the state’s workers’ compensation system from a judicial process to an administrative process and would centralize the management of state buildings and provide a plan for renovations. Bingman has championed the workers’ compensation system “reform,” which I oppose and wrote about here. Shannon championed the building plan.