The Oklahoma Conservative Tax Policy Dilemma

Image of Oklahoma State Capitol

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.