What Will Fallin Pay?

Image of Mary Fallin

(Update: Is the Fallin tax-cut plan dead? NewsOK.com is reporting Oklahoma House leaders have a new plan.)

Gov. Mary Fallin and other state Republican leaders pushing for a tax cut plan that will primarily benefit millionaires by increasing taxes for many middle-class Oklahomans should announce how much less or more personally they expect to pay in state taxes next year.

It’s their plan. Surely, they know how it will affect them. If not, then it’s obvious the plan has not been vetted in any realistic manner and the Oklahoma Legislature should reject it.

We know most millionaires with high annual incomes will undoubtedly pay less under the GOP plan, which drops the top income tax rate from 5.25 to 4.8, but what about Fallin, who makes $147,000 a year as governor? (That doesn’t take into account her husband’s income.) Will she pay less? How much?

Is this governor cutting taxes for herself while raising taxes on thousands of Oklahoma families? Oklahomans deserve to know this information.

One of the main problems that has emerged since GOP leaders announced the tax plan has been the plan’s proposal to end the personal exemption of $1,000 for people making over $35,000 or couples making over $70,000. Unless there are aspects of the plan that haven’t been revealed, it’s obvious that the loss of the personal exemption for many people will mean they will pay more in taxes even though their overall rate will be dropped.

One analysis has shown that people making $14,000 to $24,000 will also have a higher tax rate so millionaires can get more take home pay.

Here’s how the Oklahoma Policy Institute breaks down the winners and losers under the tax plan. OK Policy notes, “. . . roughly one in five families earning between $17,000 and $85,000 will pay higher taxes” and “that among the top 5 percent of households, 88 percent will pay less tax, compared to just 10 percent who will pay more.”

As usual, the highly politicized plan is being rushed through at the end of the legislative session in a frantic pace and GOP leaders such as Fallin and House Speaker Kris Steele (R-Shawnee) have resorted to rote talking points about how the tax cut plan and the proposed standstill state budget is responsible and conservative.

But here’s how state Rep. Joe Dorman, a Rush Springs Democrat, described the plan:

According to our most recent information, those in the income range of $16,000 to $24,000 will be hit particularly hard, with the average liability to the state rising by anywhere from 2.3% to 13.2% in that income range. We have requested more recent information from the Oklahoma Tax Commission as it has come to our attention that the impact could be even worse for the upper middle class.

It’s arguable whether a family of four with an income of $100,000 is really “upper middle class” or just middle class in Oklahoma, but most rational people wouldn’t consider that family rich by any means. What does Fallin think about this hypothetical family, which will pay more in taxes, according to one analysis? Does she think her family should pay less and this family should pay more? Why?

As Dorman also pointed out the tax increase proposal is probably unconstitutional anyway because of State Question 640. which places restrictions of how you can raise taxes. Here’s what Dorman said:

It is my contention, due to State Question 640, that this tax increase for many Oklahomans cannot pass without a 2/3 super majority or by a vote of the people. Not only is this plan fiscally irresponsible because it will inevitably lead to reductions to core services, but it is also illegal under the Oklahoma Constitution, as we also cannot pass revenue bills in the final five days of session.

But will Dorman’s concerns even matter given the mad rush to finish business this week at the Oklahoma Legislature, and, frankly, are enough people who stand to lose money even paying attention? Probably not.

The tax cut plan will mean $32.7 million dollars less in state revenues in fiscal year 2013 and $102 million less the following year. The GOP, which controls state government, has announced a standstill budget for next year that doesn’t take into account recent budget cuts and inflation.

Dropping the income tax rate is not a panacea. This is a bad tax cut plan. The legislature should reject it.