It’s welcome news that officials are focused on making Oklahoma more competitive with Texas.
There is a temptation to focus on state corporate income taxes – not the primary cause of state economic losses in Texas, Florida, and Tennessee. This is the fact that Oklahoma has an income tax and Texas, Florida, and Tennessee don’t.
Given the absolute onslaught by liberal states and the federal government on personal income under Democratic presidents, personal income taxes play a much bigger role in the race for growth by taxpayers and employers. Specifically, companies have moved in droves to Florida, Tennessee, and Texas from all over the United States, but all of them have some form of corporate or gross income tax. What makes these states economically attractive is that they do not tax personal income.
An income-neutral cut or elimination of Oklahoma income tax would benefit all businesses and workers. It is especially important to incentivize job creation after job losses due to the COVID-19 recession (and the prospect of further job losses). Given the promise made by the Biden government and the narrow Democratic majority to raise personal income taxes and spend so enormously that it creates the false imperative for personal income tax increases, personal income tax relief is urgently needed in Oklahoma.
The How Money Walks website tracks the flow of income across state lines. From 1992 to 2018, Oklahoma lost $ 1.79 billion in adjusted gross annual income. Much of that loss came from Oklahomans who moved to Texas and Florida.
All nine states that do not levy income taxes saw net income increases over the period – including South Dakota and Wyoming. The trend is consistent regardless of location, winter weather or the demographics of a state.
With Democratic control of Washington, most officials now expect Oklahoma to receive hundreds of millions of bailouts this year. In this environment, state policymakers should use their unrestricted state funds to strategically lower Oklahoma income tax rather than bring spending above sustainable levels.
This will lessen the penalty for work and investment in Oklahoma, and will allow our state to better compete with Florida, Tennessee, and Texas. In the long run, creating jobs in Oklahoma will do far more to improve the lives of its citizens and fund the state government than it does by using federal rescue funds to inflate spending.
Jonathan Small is President of the Oklahoma Council of Public Affairs (www.ocpathink.org).