Oklahoma: Desperate Times Call for... Completely Illogical Measures


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Oklahoma's Senate Finance Committee last week approved a bill that would drop the state's top income tax rate from 5.5 to 5.25 percent and that would remove groceries from the state's sales tax base. The proposal to cut the top income tax rate would reduce tax revenue by $44 million and exempting groceries from sales taxes would cost $245 million. With Oklahoma facing a $600 million budget deficit, why make these changes now?

The cut in the top rate was actually adopted several years ago, but was made contingent on state revenues meeting a target to ensure that the state could afford the tax cut. So, back then, lawmakers recognized that this tax cut would be expensive (though they ignored the fact that it is entirely regressive) and took steps to ensure the state could afford it. But now the state is not meeting that revenue target, the Senate Finance Committee wants to remove it and allow the tax cut to be implemented anyway. Will lawmakers actually approve this tax cut now that it is (by their own measure) unaffordable?

Similar questions could be posed about exempting groceries from the sales tax. To be sure, taxing those purchases is quite regressive, but Oklahoma has in place an income tax credit designed to mitigate the impact this policy has on low-income taxpayers. Since Oklahoma clearly can't afford a loss of tax revenue of this magnitude, why not build upon the income tax credit that's already in place -- an approach that would be less expensive and better targeted to those who need it the most? The Oklahoma Policy Institute has the details on this alternative means of helping Oklahomans struggling to make ends meet.

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