Right now, Republicans seem just as disorganized over cutting the state’s income tax rate as they did at the end of the last legislative session.
Last year, despite large majorities in the Oklahoma House and Senate, the GOP wasn’t able to pass a tax cut plan even though Republican Gov. Mary Fallin had made it a signature item in her state of the state speech at the session’s beginning.
I speculated about the reasons for the lack of a tax cut last year here. Those reasons included the state GOP’s inability to produce a sound tax policy, Republican in-fighting and maybe, just maybe, concern shared by many Democrats that it would lead to more state budget cuts.
Did some leading Republicans even want a tax cut in the first place last year?
Now, with the session scheduled to begin on Monday and with even larger majorities, Republicans have yet to offer a clear, unified plan about cutting the income tax. Looming over any tax cut proposal will be the case of neighboring Kansas, which recently cut taxes and ended up with drastic budget problems.
The lack of a real plan could change after Gov. Mary Fallin’s state of the state speech Monday, but so far the only real news has been the absence of anything specific and passable. Both Fallin and House Speaker T.W. Shannon, a Lawton Republican, have indicated they will push for a tax cut but have not been direct about it. Shannon has said he wants a “thoughtful” tax cut. Fallin has said she wants a cut without any offsets, but she has declined to reveal the size of her proposed cut before her speech. Both Shannon’s and Fallin’s reticence could indicate there’s no clear GOP consensus.
Meanwhile, state Sen. Patrick Anderson, an Enid Republican, has floated a proposal to lower the income tax to a flat rate of 2.95 percent from its current top rate of 5.25 percent and eliminate all deductions, but it’s unclear whether such a drastic plan has or could muster much support.
Fueling the tax cut mania is the public Republican fallacy that cutting taxes will lead to business growth in the state. This is not empirically proven nor is it likely to happen here in Oklahoma. Another idea behind the tax-cut craze is to reward what some in the GOP called the “makers” and punish what they call the “takers.” In other words, the GOP wants to create even more income disparity between the rich and everyone else.
Last year, I, along with many other political observers, predicted at the start of the session that a tax cut was basically a done deal, but it didn’t happen. This year, the silence is so deafening it’s difficult to predict. I do expect more intraparty squabbling among Republicans over a bevy of issues, including taxes.
The only clear assessment is this: Any tax cut that is not completely revenue neutral would be highly irresponsible and lead to more budget problems. The last thing this state needs is more cuts to state agencies and education.
An Oklahoma legislative tax proposal would hike taxes for many Oklahomans while giving tax cuts to the state’s wealthiest residents.
State Sen. Patrick Anderson, an Enid Republican, pictured right, has introduced Senate Bill 240, which would, if passed, replace Oklahoma’s current income tax structure with a flat tax of 2.95 percent, a change Anderson claims is “simple” and “fair.”
Anderson also claims that “all taxpayers are treated equally” under his proposed plan.
But the plan would also eliminate income tax deductions, credits and exemptions, and this would result in what the Oklahoma Policy Institute calls a “major tax shift.” According to OK Policy, a Tulsa think tank:
The wealthiest households would receive a tax cut, paid for by significant tax hikes on those already struggling the most to get by. Moderate-income families with children, seniors, veterans, and military personnel would be especially harmed by the loss of tax credits, deductions, and exemptions.
OK Policy estimates that under the plan a married couple with two children with an income of $24,000 annually would face a tax hike of $1,083. All similar families earning $57,000 or less would face tax hikes, according to OK Policy, while families earning $150,000 would receive a tax cut of $1,666.
But Anderson claims, “This flat tax offers tax relief to all Oklahomans, and it has no negative impact on the state budget.”
It’s unclear why Anderson would construe a tax hike for many Oklahomans as “tax relief” or if the proposal would be completely revenue neutral. Anderson, in a short press release, said the Oklahoma Tax Commission has told him the flat tax would be revenue neutral, which might be true, but the proposal hasn’t been thoroughly vetted or discussed by other agencies or outside organizations.
Anderson said the plan, if adopted, “would be a great selling point for businesses that are looking to relocate to our great state.” That claim is arguable at best and just echoes the standard GOP line about taxes that isn't quantifiable.
Essentially, the plan is presented under the guise of “tax relief” but it really only redistributes money to the wealthiest among us while making it more financially difficult for working families. This is typical GOP subterfuge. Let’s hope a majority of Anderson’s constituents see through it and speak up.
It’s uncertain how seriously Anderson’s fellow legislators will consider the bill, which will probably be just one of other tax proposals presented this coming legislative session. Republicans dominate both the Senate and House with large majorities. They failed to pass a tax cut last legislative session, but they have indicated they plan to push again this year for a cut. Gov. Mary Fallin, a Republican, also pushed for an income tax cut last year.
Recent tax cuts in neighboring Kansas have led to severe budget problems, and that state’s dire situation is sure to have an impact on the debate here in Oklahoma. Do we follow the path of Kansas and cut education and social services funding even further to benefit wealthy people?
Anderson has also introduced somewhat controversial and frivolous legislation that would prohibit the state from adopting any recommendations from Agenda 21, a United Nations measure adopted in 1992. I wrote about that here. Anderson’s bill has received widespread media attention for its needless paranoia and its possible collateral consequences.
Meanwhile, most working Americans are facing higher taxes this year because the federal payroll tax cut, implemented two years ago, has now expired. The average worker will pay $700 more a year, according to one estimate.
Anderson’s proposal, along with higher federal taxes, would make it even worse for working families in Oklahoma.
It appears that at least three Oklahoma Republican political leaders have accepted that President Barack Obama was really reelected and that their political party needs to start compromising with him on some level.
It may not mean much nationally as the so-called “fiscal cliff” negotiations drag on, but let’s hope it’s the beginning of a trend here of more rational conservative approaches to governance.
U.S. Rep. Tom Cole, pictured right, and U.S. Sen. Tom Coburn have signaled a willingness to compromise with the president on taxes, and Oklahoma Treasurer Ken Miller has praised their positions while arguing that it’s “conservative to be cautious in our approach to needed income tax reduction” in Oklahoma.
Cole came under fire from some fellow Republicans recently when he suggested his party should accept Obama’s offer to extend tax cuts to Americans with incomes below $250,000 annually, which represents 98 percent of the population, and then negotiate other budget issues. All of the Bush-era tax cuts are set to expire Jan. 1 unless Congress acts on the issue before then.
Just yesterday, Coburn’s comments that he would prefer raising tax rates on the wealthiest Americans over capping deductions received widespread media interest. Coburn said, “ . . . I would rather see the rates go up than do it the other way, because it gives us greater chance to reform the tax code and broaden the base in the future."
Meanwhile, Miller published an opinion piece recently that praised Cole and Coburn efforts at compromise. In that article, Miller also discussed efforts to reduce Oklahoma’s income tax rate, which failed in the legislature last session. Miller argues:
Is it not conservative to be cautious in our approach to needed income tax reduction, to protect the state credit rating, to pay our debts and to ensure sufficient funding for core services with a diversified and dependable revenue structure?
I would argue with the word “needed” in terms of a tax cut in the above paragraph, but I do agree with the overall argument, which contradicts those Oklahoma conservatives who think reducing the income tax is a magic elixir for the state’s economy and should be done at whatever immediate costs to core services.
Cole, Coburn and Miller are not abandoning conservative principles. They are actually promoting basic conservative principles and perhaps helping to rescue the GOP political brand on a national level. We can vehemently oppose their overall political positions, but at least their current stances on taxes contain a degree of sanity that allows for debate.
The tax policies advocated by Norquist’s group, Americans for Tax Reform, and, locally, the Oklahoma Council of Public Affairs, a conservative think tank, reduce conservatism to robotic subservience to the interests of the country’s wealthiest citizens. If Cole, Coburn and Miller represent a trend of redefining and broadening conservatism in the GOP nationally and in Oklahoma, then that’s good news.