Much has been said in the last few years about simplifying the federal tax code. While any effort to undertake such a task would no doubt be a hard-fought battle on the federal level, there is another aspect of this idea that is taking hold in the individual states. Many states have reduced and simplified their own tax code, or outright eliminated the income tax in their state. It has been a key factor in the economic growth some states are seeing. Oklahoma Governor Mary Fallin has introduced the Oklahoma Tax Reduction and Simplification Act to do that very thing. To that end, she wrote and op-ed for The Oklahoman that outlines her plan. (Because I am on her email list, I received a copy in my inbox.) As with any plan of this nature, it has its critics. Most of that criticism seems to be centered around the idea that the tax cuts will be funneled to the wealthy and to corporations, while eliminating tax breaks for the middle class. I’m not convinced that is the case, but the criticism doesn’t surprise me, given the fact that it is the liberals who are making those claims. At the very least, the plan deserves consideration and a closer look.
OP-ED by Oklahoma Governor Mary Fallin
Last week, I asked legislators to support me in implementing the most significant income tax reduction plan in state history: the Oklahoma Tax Reduction and Simplification Act.
Our plan is bold. It cuts income taxes by a significant amount for a majority of Oklahomans in every tax bracket and of every income level.
It is fast-acting. Our initial tax cuts would take place on Jan. 1, 2013.
It makes sense. Our plan takes Oklahoma’s outdated, seven-tiered system — which taxes the first dollar that every Oklahoman makes — and replaces it with three common-sense brackets. Married couples filing jointly making less than $30,000 would pay no income taxes, or zero percent. A couple making between $30,000 and $70,000 would pay a 2.25 percent tax rate, a significant reduction. Finally, those making more than $70,000 would be taxed at a rate of 3.5 percent, down from 5.25 percent.
Our tax proposal is also responsible. The plan sets the stage for the complete elimination of the income tax by proposing a quarter-point reduction in taxes each year after the initial cuts. However, those cuts are tied to a revenue growth trigger of 5 percent, meaning that if the state experiences a shortfall or another recession, it won’t be stripped of the revenue it needs to fund core services. Furthermore, our proposal is largely paid for by eliminating government waste as well as dozens of tax loopholes and tax credits, creating a system that benefits everyone as opposed to narrow special interests. Future economic growth — spurred by lower tax rates — will also help offset costs.
Finally, the Oklahoma Tax Reduction and Simplification Act is what I like to call a “game-changer.” By implementing our tax plan, we would immediately become a more attractive state to do business in. Oklahoma would have one of the lowest income tax rates in the country and the lowest in our region, second only to Texas.
Studies show that income tax levels can be an accurate predictor of job growth. As Americans for Prosperity reports, states with no income taxes have seen job growth of 4.7 percent over the last 10 years, while high-tax states have lost jobs at a rate of 2.9 percent.
Those statistics quantify what any small business owner knows in his gut: Higher taxes create an unfriendly climate for business, stifle expansion and job growth and can even force relocation. Lower taxes do just the opposite.
Despite the fact Oklahoma is experiencing a strong recovery and healthy economic growth, we cannot afford to be complacent. To our north, Kansas and Missouri are acting to reduce their income taxes. Texas already has none. Businesses will always have a choice.
We can make that choice an easy one. By embracing a simpler tax code that allows Oklahomans to keep more of their hard-earned money, we can set our state and our citizens on a path toward greater prosperity and attract greater investment and job growth from across the country.
It sure looks like a good plan to me, Larry. I wish you all good luck, in Oklahoma.
The states are pointing the way out of our self-created morass.
I had not heard of this. Thanks for the info!
I think it’s good and proper for the states to take the lead on things like this. That’s much better than allowing the federal government to dictate and mandate.
It doesn’t sound like the special interests who will be losing their tax credits and preferences have chimed in yet. I hope they do, and do so in a loud way, so they can be shut down loudly and quickly. It will be a great lesson for other states to follow. Good for OK…you’re fortunate to be in a state that initiates this from a position of fiscal strength.
I am with you on the special interests. No doubt, they will be raising a fuss when the full details of the plan are made public. When they do, I hope Governor Fallin and her staff stick to their guns. I think this will be a good thing for Oklahoma.
Sounds like a good plan Larry, hopefully other states will follow. If the federal government is unwilling to do this maybe the states will, it might be our only way out of this mess.
Very true, Steve. The states should lead the way, instead of bowing down completely to the mandates of the federal government.