Taxes

Spoiled Oklahoma

Image of Oklahoma State Capitol

Recently compiled statistical information confirms Oklahoma continues to rely heavily on the federal government for its financial viability and maybe its very existence.

This comes against the backdrop of all the anti-federal government whining among conservatives here about overspending and deficits in Washington, D.C. Here are some questions: If Oklahoma paid its fair share to the federal government, what would happen to its health and education systems? What would happen to the economy? Could it even exist as an independent state?

Without help from taxpayers from other states, such as New York, Oklahoma would lose approximately $12.5 billion a year if it got back dollar for dollar what it paid to the federal government each year in income, payroll, business, excise and estate taxes. Last year, the entire state budget for Oklahoma was only $7.1 billion.

The information comes from State Smart, an online, interactive site published by the National Priorities Project, which describes itself as a . . . “non-partisan research organization dedicated to making complex federal budget information transparent and accessible so people can prioritize and influence how their tax dollars are spent.”

Here’s how State Smart breaks down the numbers from Oklahoma: Using data from the most recent years available, Oklahoma received an estimated $38.6 billion from the federal government, which includes $7.6 billion for programs like Medicaid and Temporary Assistance for Needy Families; $22.2 billion in payments and grants for programs such as Social Security and Medicare and Pell Grants; $2.1 billion in federal contracts; and $6.7 billion for the salaries and benefits of federal employees.

Oklahomans and the state’s businesses paid in $26.1 billion to the federal government during the same time period, with more than 75 percent coming from individual and payroll taxes. That’s a $12.5 billion difference, with Oklahoma on the receiving end.

By comparison, the state of New York, using the same calculations, received $191.6 billion from the federal government yet paid in $207.4 billion. That means New Yorkers paid an estimated $15.8 billion more in taxes that they received back from the federal government, which is more than enough to fund Oklahoma’s shortfall.

According to the available statistics that have calculated this information through the years, Oklahoma has long been known as a “receiver state,” or a state that receives more back from the federal government than it pays in federal taxes. In itself, there’s nothing intrinsically wrong with this system. The country needs the federal highway system and federal outposts, such as courts, offices and military bases, in all the states. Some states will always have to give more to support the country as a whole. This helps keep our country’s democracy functioning.

But what should continue to aggravate progressives and, really, everyone here is the relentless criticism by some conservatives about the overspending of the federal government and the push on the state level for more tax cuts for Oklahoma’s wealthy.

I’m reminded especially of Gov. Mary Fallin’s argument in a recent State of the State speech that Oklahoma has something to teach the federal government about fiscal responsibility and her recent campaign television advertisements bashing the federal Affordable Care Act. Is the lesson that you should criticize a larger and more powerful entity that basically provides for your financial viability, that, let’s face it, actually provides for your existence? It’s as if Oklahoma is an immature, spoiled child complaining about his/her generous and loving parents. Remember, that’s $12.5 billion spoiled.

The anti-federal government rhetoric here is hollow and shallow. It’s reductionist sloganeering. It’s not rooted in reality. It’s hypocritical. It’s not helpful for the vast majority of Oklahomans, only the wealthy and conservative politicians pandering to low-information voters so they can get elected. It’s dumb.

The truth is Oklahoma, with its low taxes and its budget of only $7 billion or so, remains a state with poor medical outcomes and health systems, dreadfully underfunded education systems, extreme costly weather disasters and rotting infrastructure, and the only thing that keeps it afloat are tax dollars that come from other states.

The following question is purely speculative and philosophical. Could the state even exist as a separate entity if the billions of dollars provided by taxpayers from other states were eliminated, the Oklahoma legislature continued to reduce state revenue through tax cuts for rich people and the recent oil and gas fracking boom here went bust? I believe it would certainly create a new mass exodus from the state.

Sure, it’s difficult to imagine all that happening at once or Oklahoma becoming a part of Texas or part of a newly formed state carved out among other receiver states or perhaps even a federal territory again, but more extreme events in history have happened and will happen in the future.

A Problematic Tax Cut

Oklahoma State Capitol

Oklahoma lawmakers passed an irresponsible tax cut this week that primarily benefits the state’s wealthiest residents.

The cut was touted as “much needed tax relief to families” in a legislative media release, but the reality is that only the richest in the state will see any real benefit. If lawmakers really cared about families here, they would actually raise taxes on the wealthiest 1 percent in order to cut taxes for the middle class and appropriately fund public schools. What's a middle-class family going to do with an extra $50 or so per year? How much "relief" is that going to bring about.

The Oklahoma Policy Institute issued this statement about the cut:

Today House members have ignored the wishes of most Oklahoma voters and the best evidence for what helps Oklahoma’s economy. They approved tax cuts that will do little to nothing for most families while taking over $250 million out of schools and other important foundations of our economy. They voted for automatic tax cuts for future years even though the Tax Commission can’t say how much it will cost and we have no projections of what our budget needs will be.

The cut reduces the top income tax rate from 5.25 to 5 percent in 2016 and then later to 4.85 percent. The cut is dependent on revenue growth.

Meanwhile, the state has pressing funding needs. There have been steep cuts in education funding since the economic downturn. Many state employees have gone without raises for several years. The state Capitol building needs major repairs. The budget faces a $188 million shortfall. A tax cut certainly isn’t a solution to any of these problems.

Meanwhile, the idea of instituting tax cuts for the future just doesn’t make much sense. Why not just wait until 2015 to determine 2016 budget needs? What will next year’s legislature do with taxes? Obviously, the tax cut is driven by election-year politics in an extremely conservative state.

Republicans, who hold all statewide offices and massive majorities in the legislature, continue to ignore the state’s pressing needs.

The Rich Reward

Image of sign from Occupy OKC

An analysis of Gov. Mary Fallin’s proposed income tax cut proposal shows that Oklahoma’s wealthiest households will benefit the most while 41 percent of its residents will get no benefit at all.

The overall average tax cut would be a paltry $29 while those in the top 1 percent in income would receive an average of $2,009.

The analysis, prepared by the Institute for Taxation and Economic Policy (ITEP) and distributed by the Oklahoma Policy Institute, clearly shows Fallin’s proposal is primarily designed to reduce the tax burden for the wealthy at the expense of the poor and middle class.

In her State of the State speech earlier this month, Fallin proposed cutting the top income tax rate from 5.25 to 5 percent despite the fact that Oklahoma faces a $170 million budget shortfall and has cut per pupil spending on a percentage basis more than any other state in the nation since 2008.

The regressive tax cut would mean a $135 million annual loss in revenue, according to OK Policy, while 41 percent of Oklahomans wouldn’t get a break at all because they aren’t taxed at the top income rate.

The arguments justifying the proposed cut are based on fallacious claims that it would drive economic development or that Oklahoma needs to be competitive with neighboring states with lower tax rates. There is no actual empirical evidence or specific studies related to Oklahoma that show this is actually true. Thus, it’s not difficult to view the proposed cut in pure class terms. The rich will benefit greatly; the poor will not benefit at all. The middle class gets a token cut.

The Oklahoman editorial board tried to justify the proposed tax cut in a larger perspective, but its right-wing blinders failed to produce a valid argument. This is from a recent editorial supporting the cut:

It’s also true that the more money you earn, the more money you save when the tax rate is cut. That’s just basic math. This doesn’t mean the rich are getting a bigger tax cut than the middle class. The rate reduction would be the same for both. Instead, it means the rich have more money than the middle class and pay more in taxes, which isn’t breaking news. They will pay more in taxes regardless of the rate.

This is a tired argument. Yes, the rich pay more in taxes because they are rich. Everyone gets that. Why repeat the obvious? It’s like saying, “The rich are rich. They have all the money.” To use italics just like The Oklahoman editorial, We know that. The point is the flat rate reduction doesn’t benefit thousands upon thousands of Oklahomans at all and only gives a small cut to many other Oklahomans. Why not RAISE the tax rate on the top 1 percent and lower the rate for others? Obviously, Fallin and The Oklahoman would scoff at this progressive idea, but at least it gives us something to debate rather than just listening to wishful thinking about economic development and reading another ad nauseam lecture about the intrinsic wonderfulness of rich people.

Along with her proposed tax cut, Fallin wants steep budget cuts to higher education and the Oklahoma Health Care Authority. This will ensure the state will continue to have a low college graduation rate and that the poor will continue to have limited medical care options.

Dumb? Unhealthy? For decades, these have been the sweeping and one might argue unfair stereotypes of Oklahomans from some people who live in other sections of the country and world. Fallin’s proposed tax cut wouldn’t change that at all.

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