Taxes

An Oklahoma legislative tax proposal would hike taxes for many Oklahomans while giving tax cuts to the state’s wealthiest residents.

State Sen. Patrick Anderson, an Enid Republican, pictured right, has introduced Senate Bill 240, which would, if passed, replace Oklahoma’s current income tax structure with a flat tax of 2.95 percent, a change Anderson claims is “simple” and “fair.”

Anderson also claims that “all taxpayers are treated equally” under his proposed plan.

But the plan would also eliminate income tax deductions, credits and exemptions, and this would result in what the Oklahoma Policy Institute calls a “major tax shift.” According to OK Policy, a Tulsa think tank:

The wealthiest households would receive a tax cut, paid for by significant tax hikes on those already struggling the most to get by. Moderate-income families with children, seniors, veterans, and military personnel would be especially harmed by the loss of tax credits, deductions, and exemptions.

OK Policy estimates that under the plan a married couple with two children with an income of $24,000 annually would face a tax hike of $1,083. All similar families earning $57,000 or less would face tax hikes, according to OK Policy, while families earning $150,000 would receive a tax cut of $1,666.

But Anderson claims, “This flat tax offers tax relief to all Oklahomans, and it has no negative impact on the state budget.”

It’s unclear why Anderson would construe a tax hike for many Oklahomans as “tax relief” or if the proposal would be completely revenue neutral. Anderson, in a short press release, said the Oklahoma Tax Commission has told him the flat tax would be revenue neutral, which might be true, but the proposal hasn’t been thoroughly vetted or discussed by other agencies or outside organizations.

Anderson said the plan, if adopted, “would be a great selling point for businesses that are looking to relocate to our great state.” That claim is arguable at best and just echoes the standard GOP line about taxes that isn't quantifiable.

Essentially, the plan is presented under the guise of “tax relief” but it really only redistributes money to the wealthiest among us while making it more financially difficult for working families. This is typical GOP subterfuge. Let’s hope a majority of Anderson’s constituents see through it and speak up.

It’s uncertain how seriously Anderson’s fellow legislators will consider the bill, which will probably be just one of other tax proposals presented this coming legislative session. Republicans dominate both the Senate and House with large majorities. They failed to pass a tax cut last legislative session, but they have indicated they plan to push again this year for a cut. Gov. Mary Fallin, a Republican, also pushed for an income tax cut last year.

Recent tax cuts in neighboring Kansas have led to severe budget problems, and that state’s dire situation is sure to have an impact on the debate here in Oklahoma. Do we follow the path of Kansas and cut education and social services funding even further to benefit wealthy people?

Anderson has also introduced somewhat controversial and frivolous legislation that would prohibit the state from adopting any recommendations from Agenda 21, a United Nations measure adopted in 1992. I wrote about that here. Anderson’s bill has received widespread media attention for its needless paranoia and its possible collateral consequences.

Meanwhile, most working Americans are facing higher taxes this year because the federal payroll tax cut, implemented two years ago, has now expired. The average worker will pay $700 more a year, according to one estimate.

Anderson’s proposal, along with higher federal taxes, would make it even worse for working families in Oklahoma.

It appears that at least three Oklahoma Republican political leaders have accepted that President Barack Obama was really reelected and that their political party needs to start compromising with him on some level.

It may not mean much nationally as the so-called “fiscal cliff” negotiations drag on, but let’s hope it’s the beginning of a trend here of more rational conservative approaches to governance.

U.S. Rep. Tom Cole, pictured right, and U.S. Sen. Tom Coburn have signaled a willingness to compromise with the president on taxes, and Oklahoma Treasurer Ken Miller has praised their positions while arguing that it’s “conservative to be cautious in our approach to needed income tax reduction” in Oklahoma.

Cole came under fire from some fellow Republicans recently when he suggested his party should accept Obama’s offer to extend tax cuts to Americans with incomes below $250,000 annually, which represents 98 percent of the population, and then negotiate other budget issues. All of the Bush-era tax cuts are set to expire Jan. 1 unless Congress acts on the issue before then.

Just yesterday, Coburn’s comments that he would prefer raising tax rates on the wealthiest Americans over capping deductions received widespread media interest. Coburn said, “ . . . I would rather see the rates go up than do it the other way, because it gives us greater chance to reform the tax code and broaden the base in the future."

Meanwhile, Miller published an opinion piece recently that praised Cole and Coburn efforts at compromise. In that article, Miller also discussed efforts to reduce Oklahoma’s income tax rate, which failed in the legislature last session. Miller argues:

Is it not conservative to be cautious in our approach to needed income tax reduction, to protect the state credit rating, to pay our debts and to ensure sufficient funding for core services with a diversified and dependable revenue structure?

I would argue with the word “needed” in terms of a tax cut in the above paragraph, but I do agree with the overall argument, which contradicts those Oklahoma conservatives who think reducing the income tax is a magic elixir for the state’s economy and should be done at whatever immediate costs to core services.

Cole, Coburn and Miller are not abandoning conservative principles. They are actually promoting basic conservative principles and perhaps helping to rescue the GOP political brand on a national level. We can vehemently oppose their overall political positions, but at least their current stances on taxes contain a degree of sanity that allows for debate.

The tax policies advocated by Norquist’s group, Americans for Tax Reform, and, locally, the Oklahoma Council of Public Affairs, a conservative think tank, reduce conservatism to robotic subservience to the interests of the country’s wealthiest citizens. If Cole, Coburn and Miller represent a trend of redefining and broadening conservatism in the GOP nationally and in Oklahoma, then that’s good news.

Recent news and developments related to tax policy and Oklahoma have exposed the faulty logic and basic mathematical problems inherent in a conservative ideology that privileges the wealthy and corporate interests.

It’s an ideology that dominates current Oklahoma government policy. Here are three recent developments that share a similar mathematical theme while exposing the real intent of many conservative leaders here:

(1) Good Jobs First and the Iowa Policy Project published a study last week that ripped the state tax policies of the American Legislative Exchange Council (ALEC), focusing on the work of Arthur Laffer, a former economic advisor to the late President Ronald Reagan. Laffer’s ideas were used to support Republican-based income tax cutting proposals during Oklahoma’s last legislative session. The proposals, which primarily benefited the wealthiest Oklahomans, didn’t pass. Underpinning Laffer’s work is the idea that cutting taxes creates a better business environment, but his “arguments and evidence range from deeply flawed to nonexistent, consistently ignoring decades of peer-reviewed academic research,” the study found. In short, ALEC’s math just doesn’t add up. The study, “Selling Snake Oil To The States,” argues the Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index is deeply flawed. According to the study’s executive summary:

A hard look at the actual data finds that the Alec-Laffer recommendations not only fail to predict positive results for state economies—the policies they endorse actually forecast worse state outcomes for job creation and paychecks. That is, states that were rated higher on ALEC’s Economic Outlook Ranking in 2007, based on 15 “fiscal and regulatory policy variables,” have actually been doing worse economically in the years since, while the less a state conformed with ALEC policies the better off it was.

What this means is that some Oklahoma Republicans have been basing their arguments on restructuring the state’s taxation system on “nonexistent” evidence. That’s not surprising, but now that Laffer’s work, embraced particularly by the Oklahoma Council of Public Affairs, a conservative think tank, has been discredited, will conservatives still push for unpaid tax cuts next legislative session?

(2) The cost number used by Gov. Mary Fallin to validate her decision to reject the expansion of Medicaid coverage for low-income people here under the Affordable Care Act is “greatly exaggerated and misleading,” according to the Oklahoma Policy Institute, a think tank based in Tulsa. Fallin claims the expansion would cost the state $475 million over seven years. According to OK Policy, that’s not based on the right mathematical assumptions:

It is based on unrealistic assumptions of how many people will enroll in Medicaid, includes costs that the state will absorb whether we expand Medicaid or not, and ignores savings and new revenues that will benefit the state budget. When we consider benefits of increased coverage for the health of our citizens and financial well-being of our health care providers, Medicaid expansion is clearly affordable and urgent.

Again, Republicans are distorting mathematical formulas and predictions to promote an ideology. OK Policy notes. “If we set aside the population that is already eligible for Medicaid, use realistic participation assumptions, and consider offsetting savings and new revenues, the state will be looking at very modest spending increases by expanding Medicaid and could enjoy net savings.” Surely, the issue warrants a deeper look at the numbers. A healthier population is vital to the state’s interests.

(3) A recent investigative report by The New York Times shows the massive amount of money spend on corporate subsidies in this country. The nation collectively spends more than $80 billion on such subsidies. In Oklahoma, the number is a staggering $2.19 billion each year. To put that in perspective, the current Oklahoma annual budget is $6.8 billion. The state subsidies are about one-third of the entire budget.

What does the state get in return for its corporate generosity? According to The Times, that’s difficult to determine:

Nor do they [government agencies] know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.

Democrats have participated in increasing what is known as corporate welfare as well as Republicans in the last three decades or so, but it has been conservative “trickle down” ideology that has been at the center of shifting tax dollars away from education and health services to corporations. It’s a mathematical dilemma for conservatives again. How can you cut education funding any further while giving subsidies to state businesses, which don’t even need them? How can you deny Medicaid coverage to low-income people when huge corporations get billions in state money?

In recent years, both Chesapeake Energy and Sandridge Energy received $13.9 million under the state’s Quality Jobs Program. Continental Resources received subsidies of $20.4 million while Weyerhauser received $163 million, the highest amount.

The larger picture here, of course, is that conservative ideology is damaging Oklahoma’s economic well-being, setting in place a system that ignores basic mathematical reconciliation or awareness. The numbers, which tell the real story, show a stark reality for our Republican-dominated state in the coming years as it continues through tax policy to shift income to the wealthy and corporations at the expense of the less advantaged and the middle class.