Taxes

Cole, Coburn and Miller: A Conservative Tax Policy Awakening?

Image of Tom Cole

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.

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.

Tax Cut Forces Regroup

 Image of Oklahoma State Capitol

The state’s tax cut forces are already posturing and signifying their intentions several months away from next year’s legislative session.

Last week, Oklahoma Gov. Mary Fallin, who leads a Republican-dominated state government, told the Wall Street Journal that her party would again push for an income tax reduction, a proposal that failed to pass the legislature last session.

According to StateImpact, Fallin would like to see at least a cut from 5.25 percent to 4.8 percent in the income tax. Such a cut, if not offset by raising other taxes or increasing other revenues, would devastate the budgets of state agencies and educational institutions, which have faced severe cuts in recent years.

It’s important to note that tax revenues remain significantly below what they were before the 2008 economic downturn. It’s simply unconscionable and irresponsible to cut taxes under these conditions unless there are replacement revenues or a specific plan that spells out the ensuing budget cuts. If the GOP wants to continue to layoff teachers and eliminate teaching positions in public schools to give rich people tax cuts, then that’s its prerogative as the party in power, but it shouldn’t hide behind the flimsy argument that a cut will attract more businesses to Oklahoma, making up for any lost revenue.

I know we’re several months away from the renewed tax-cut effort, but reporters and editors for local corporate media outlets should begin discussing how to cover the tax-cut plans that will undoubtedly emerge next session. Here are three areas to consider:

  • How much will it cost? Last session, it was often difficult to determine the cost of the individual tax-cut plans. One problem, as I mentioned, was the impossible-to-determine idea that a cut was going to generate new tax revenue. The corporate media can duly report this GOP myth, but it needs to press for specific numbers from the tax cutters. Obviously, the Oklahoma Policy Institute (OK Policy), a Tulsa-based think tank, has proven itself as a reliable source for tax information, and it needs to be consistently cited in the process, but Fallin, her surrogates and legislative leaders need to be pressed for the exact loss in revenues a tax cut would generate. If they cannot produce a reliable figure—accepted as accurate by OK Policy and others—then the plan should be considered irresponsible.

  • What will get cut? If the tax cut is not offset by other revenues, such as eliminating certain tax credits or raising sales taxes, and there will be budget cuts, then those cuts need to be specifically outlined by the tax plan. The corporate media should demand Fallin and legislative leaders present this information. It’s simply irresponsible not to have a budget-cutting plan that corresponds with any given tax-cut plan. I’m not in favor of more budget cuts, of course, but I also know the Republicans control the government. If the Republicans are going to partially pay for tax cuts by, say, laying off educators and other state workers, then they should be held accountable to it before the plan gets a vote.

  • How much will Fallin get? Last session, I think I was the only voice that called on Fallin to calculate and announce just how much she would receive from a tax cut plan. The tax-cut plans floated last year favored the wealthiest Oklahomans. Perhaps, the best way reporters and editors could explain this is on personal terms. How much would Fallin make under the tax-cut? How much would a teacher making $40,000 or a fast-food worker making $20,000 annually make? This is important. Will GOP leaders like Fallin give themselves a huge tax cut at the expense of school children and the impoverished as morally reprehensible as that might seem or should seem to some people? Perhaps. But if they do so, they need to do so openly. It seems like such an easy question to ask. ”Governor Fallin, how much less will you pay in state taxes under the plan?” But does anyone in the so-called mainstream press corps here have the guts to ask the question?

NewsOK.com recently published a story in which some state leaders called for more transparency and openness in the state’s budgeting process. Transparency is necessary in order for democracy to thrive, and, in terms of the Oklahoma budget process, the tax cut plan will be center stage next session. Nothing will probably be more critical next legislative session than knowing exactly the impact of any proposed income tax cut. That’s where state government transparency should begin in 2013.

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