With Republicans in the ascendant in Oklahoma — a two-thirds majority, or close to it, in each of the two legislative houses, plus the Governor — the talk has once again turned to the income tax, and this time they're not talking about merely cutting it: they're talking about discontinuing it altogether. Since there is no practicable way to get rid of it in one fell swoop, they're talking a gradual phase-out.

For instance, Governor Fallin made the following proposal in State of the State '12 earlier this month:

It would, beginning on January 1, 2013, replace our current system, which taxes the first penny that every Oklahoman makes. It reduces the seven brackets we currently have to 3 lower and flatter rates:

Those couples making $0 to $30,000 a year will now pay nothing in state taxes. For those making $30,000 to $70,000 a year, the tax rate will be 2.25 percent. And for families making over $70,000 a year, the rate will be 3.5 percent, as opposed to the 5.25 percent rate they are currently paying.

Under these new rates, a middle class couple making $40,000 a year, for example, will pay 37 percent less in taxes in 2013, with additional cuts in future years.

These tax cuts would take place immediately, in year one. Moving forward, tax rates would be cut by an additional quarter point in any year which the state of Oklahoma hits a revenue growth trigger of 5%. That growth trigger gives the state a safety net should we experience another economic downturn.

Since we're not in an economic downturn right now, doncha know. The official unemployment rate has been hovering just over 6 percent, which is far better than the national average, but there is reason to question the methodology of the official unemployment rate. (The first act of the Hill Administration will be to turn the Bureau of Labor Statistics into a clearinghouse for fantasy baseball leagues.)

Now any tax system that puts me in the top bracket is, by my definition anyway, in bad need of replacement, and eventually the Guv (and the GOP legislators) want to replace it with, well, nothing at all. On one level, this suits me fine: I can think of a lot of ways I'd prefer to spend a couple of grand a year. But the pols' sanguine approach makes me wonder if maybe I'm going to be bled to death from some other vein instead: it's not like anyone is calling for massive spending cuts or more than perfunctory downsizing of state government. And no wonder: the state Constitution, upwards of 50,000 words, a hair longer and a smidgen scarier than Slaughterhouse-Five, mandates a lot of the stuff the state does, and changing the Constitution requires rare unanimity among legislators and/or a whole slew of state questions, and voters complain about the length of the ballot already.

So I'm operating under the assumption that the revenues will come from Someplace Else yet undetermined. The sales tax, perhaps? After all, if we get to keep more of our own money, we'll spend it, right? "Hype," says an Oklahoman editorial:

[T]he argument that an income tax reduction to, say, a 3 percent top rate could be "paid for" by increased consumer spending is problematic...it's not unreasonable to say that an income tax cut would lead to increased spending and therefore boost sales tax receipts, perhaps significantly. The question is whether the spending and resultant sales tax take would cover the cost of cutting the income tax, as some supporters have claimed.

Well, okay, but suppose the sales tax were restructured to eliminate the scores of loopholes and exemptions that currently exist?

We doubt the people will see the taxation of previously untaxed items — even if it means lower income taxes — as anything other than an increase in sales taxes.

And when the Oklahoman, which never met a tax it liked, looks askance at a tax-elimination proposal, I have to believe that there's something seriously askew somewhere.

But you're missing the point, say the Chamber of Commerce types. Why, cutting the income tax will enable us to compete with other states.

Look at that unemployment rate again. (Even if it's bogus, the bogosity is nationwide, so at least it can still be used for comparison.) We don't seem to be doing that badly even with the tax.

Philosophically, I am generally in favor of anything that will cost me less. As of yet, I'm not persuaded that cutting the income tax down to size will actually cost me less. Blame Congress, which has demonstrated its willingness to engage in all manner of chicanery to keep the gravy train rolling; as always, it's the 90 percent of politicians who make the other 10 percent look bad.

The Vent

  17 February 2012

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 Copyright © 2012 by Charles G. Hill