The state income tax has been at the forefront of Governor Fallin and the Oklahoma Republican legislature agenda for the upcoming 2012 session. They want to eliminate the state income tax over an extended period of time- something like 10 years. They claim by letting Oklahoma private citizens keep that money, it will grow the tax base and revenue to Oklahoma state government would not suffer. Much of their conclusions are based on the ‘Laffer curve’ and economic projections from the Oklahoma conservative think tank- OCPA.
First, I am not against reforming or even elimination of the Oklahoma state personal income tax. However, the Governor and the legislature should use this opportunity to take a two pronged approach. Phase out the income tax and trim government by the same amount. Deal with both sides of the ledger. We know Oklahoma has too many state employees. Make strategic surgical cuts to Oklahoma government- not across the board cuts. Some state agencies need more funding, some need to be cut back or eliminated.
Second, the talk of a Flat Tax implies the Oklahoma personal income tax is not going away, but is just going to be reformed. A flat tax is a far better and fairer system of taxation than any other. Everyone pays the same percentage, so as your income increases you pay the same percentage. If that system (the tithe) is good enough for a sovereign creator, it should be good enough for Oklahoma state government. But going to a Flat Tax is not what the Governor and legislature are talking about- they are talking about phasing out the state income tax completely.
Third, currently Oklahoma’s personal income tax system is unfair, but we know it exists- it’s the devil we know. When Oklahoma state government starts talking about eliminating the income tax- over twenty percent of state government’s income stream- it causes me to worry about where they plan to make up the shortfall if the Laffer curve projections fail. I believe in supply side economics and the projections may come to past, but if they don’t where will they hide the taxes and fees to make up the shortfall?
Until I see the details, I am skeptical of revamping, reforming, eliminating the state income tax. Oklahoma Republican leaders should not miss a golden opportunity to put forward a ten year plan to streamline Oklahoma government and reduce taxation at the same time.