The entirely expected announcement that Oklahoma faces a current revenue failure and is predicted to have an approximately $900 million budget shortfall next fiscal year should dispel the myth that tax cuts lead to economic growth and adequate funding for government.
I use “should” because it’s highly unlikely that Republicans, who control the state government here, will drop the pretense and start leading the state with prudent and sensible financial policies. There are some exceptions, such as Oklahoma Treasurer Ken Miller and State Auditor and Inspector Gary Jones, but it’s highly unlikely conservatives here will break with the GOP tax-cut orthodoxy, which benefits the wealthiest among us at the expense of school children and other vulnerable Oklahomans.
Since 2004, Oklahoma has enacted income tax cuts that have dropped the top rate from 7 to 5.25 percent. Another tax cut, amazingly enough, is going into effect this coming Jan. 1 when top rate will drop to 5 percent. Republicans will point gleefully to the fact that former Gov. Brad Henry, a Democrat, was in office when the tax-cutting carnage began, but that doesn’t mean it was right or that the mythology that tax cuts lead to economic growth is true. Henry was also trading tax cuts for increases in state funding for various entities, such as education.
— Tulsa World (@tulsaworld) December 16, 2015
But, yes, it’s also true that since the 2008 recession, Oklahoma has cut education funding the most of any state in the nation on a percentage wise basis and continues to lag behind in funding for mental health services. The state faces a teacher shortage because, among other things, it pays teachers some of the lowest salaries in the nation. The expected cuts in mental health will probably leave thousands of Oklahomans without medical care.
It’s important to note the state has also recently cut the gross production tax rate to benefit the bottom line of oil and gas companies.
It’s uncertain, at this point, how the cuts will impact various state agencies and entities this fiscal year because of the revenue failure, which kicks in when revenues drop below a certain predicted budget threshold and go deeper than the 5 percent financial cushion used in the process. According to a Tulsa World article, the cuts are initially across the board, but legislators could change that when they convene in the upcoming session.
In the end, it’s grim times for Oklahoma, folks. Financial experts point to the decline of fossil fuel prices because of gluts created by the hydraulic fracturing and horizontal drilling boom here, which lower tax revenues, as the main culprit for the state’s financial problems, but the state has struggled to adequately fund everything from education to health to corrections for years now. Oklahoma simply doesn’t have rational legislative stewards of its finances right now. There are amazingly talented financial experts at various state agencies in Oklahoma, but they’re not calling the shots on tax cuts. They’re just handed a mess and told to deal with it.
The tax cuts here DID NOT lead to prosperity nor will they ever lead to prosperity.
The tax-cutting myth goes like this: Once upon a time, a government cut its taxes and companies flocked to that government’s jurisdiction to reap the awards of more profits. The collective amount of taxes from the new companies far exceeded the amount generated by fewer companies taxed at a higher rate. Everyone lived happily ever after.
The myth has been exposed glaringly in Kansas. Republicans there slashed taxes by huge amounts and the state’s economy has imploded, jobs have been lost and cuts to government have hurt the state’s national image.
The Center on Budget and Policy Priorities puts it this way:
The idea that cutting personal income taxes might boost the economy is not new. Over the last three decades, a significant number of states have tried this approach. The results make clear that deep personal income tax cuts are no panacea for state economies. States that followed this prescription for growth did not do particularly well in later years.
I’ve written recently about diversifying the Oklahoma economy. The revenue failure and budget shortfall just highlight the issue even more. Here’s three things to do: (1) Invest in public education at all levels in Oklahoma. (2) Develop more renewable energy sources to help the economy grow here and to help mitigate the effects of global warming. (3) Recruit and help technology companies to come here or open up here. As you will note, the last two ideas look to a real future, not outdated myths.
But the obvious lesson here above all is to stop cutting taxes without replacing the lost revenue from other sources or openly cutting designated and specific government spending.
— Education Votes (@edvotes) December 15, 2015