Budget hole doesn’t prevent income tax rate cut

Budget hole doesn’t prevent income tax rate cut

The Tulsa World
By World’s Editorial Writers
Published: 2/25/2011 2:26 AM
Last Modified: 2/25/2011 5:21 AM

It’s official: In the next tax year well-heeled Oklahomans will see the state’s top income tax rate plummet from 5.5 percent to 5.25 percent.

Whether this is cause to clap our hands or wring them depends on what taxpayers in general think this reduction will do for Oklahoma.

The state has suffered enormous revenue losses and gone through a series of tax cuts over the past several years. It’s also gone through some staggering cutbacks in state services, and faces a yawning budget hole of at least $500 million in the next fiscal year. Yet the Board of Equalization on Tuesday determined that the state had enough revenue growth to trigger a lowering of the income tax rate from 5.5 percent to 5.25 percent for top wage-earners and the wealthiest citizens.

Gov. Mary Fallin, whose budget calls for agency cuts of up to 5 percent in fiscal 2012, argues that reduction of the tax rate yet again is a logical extension of the message taxpayers sent in the November election. She claims that the mandated reduction will stimulate the economy and make the state more business friendly and more competitive with other states. Will this income tax cut do something that the previous ones haven’t?

Come on.

Are businesses seriously going to look at this state and say, “Oklahoma, what an economic Garden of Eden?” and overlook the fact that the quality of life here is eroding by the day?

Oklahoma’s state services are woefully underfunded. The education system is being starved. Roads and infrastructure
are mediocre and in many cases are crumbling. The health and welfare of Oklahoma’s citizens don’t appear to be a high priority for those holding the purse strings.

But, hey, never mind all that, the fatter cats get this great reduced tax rate of 5.25 percent.

David Blatt of the Oklahoma Policy Institute has analyzed the tax cuts’ impact on the state budget. When tax cuts are fully phased in by 2012 the cuts will likely cost the state $120 million per year, “representing more than 2 percent of the General Revenue Fund at a time when even 5 percent revenue growth may be optimistic.”

We doubt seriously that these cuts are going to make Oklahoma more competitive. But saying that sounds good – another triumph of form over substance.