Taxing Times

The powers-that-be in Oklahoma are hell-bent on eliminating the state income tax.

They won't get it done in this year's legislative session -- too many special interest hurdles to clear. But make no mistake: It eventually will get done, barring significant turnover in the Legislature's anti-government majority.

So, the question is, is it good or bad for Oklahoma?

The answer depends on whether you're a card-carrying member of the 1 percent or the 99 percent.

Hey, you -- over there -- quit rolling your eyes. I saw you. Yes, it's true I've appropriated a slogan of the Occupy movement. But just because it's shorthand used by a group you can't abide doesn't mean it's not accurate or useful, especially when discussing income taxes.

The fact is, if we eliminate the state income tax -- roughly one-third of the state's revenue -- we have two choices: replace it with other (in some cases, higher) taxes or eliminate vital state services.

The powers-that-be love to talk about you keeping more of your hard-earned money.

What they don't like to discuss is what eliminating the income tax could mean for public education, child welfare, corrections, highways and other essentials we've long agreed to finance collectively.

What's even more frightening to the one percent is that the 99 percent might one day come to understand that elimination of the state income tax almost certainly means they'll be paying higher taxes.

We probably won't know until late May what will be included in this year's bite at the income-tax-elimination apple, but let's consider some of the possibilities.

One proposal advanced by the conservative, anti-government Oklahoma Council of Public Affairs would reduce the top rate from 5.25 percent to three percent as part of a 10-year plan to eliminate it entirely.

The OCPA plan -- developed by the so-called "father of supply-side economics," Arthur Laffer -- would eliminate all tax exemptions, deductions and credits as a means of offsetting the lost income tax revenue.

What does that most likely mean for 99 percent of taxpayers? Standard deduction, gone. Itemized deduction, gone. Personal exemption, gone. Earned income tax credit, gone. Sales tax credit, gone.

In other words, higher taxes.

The Washington-based Institute on Taxation and Economic Policy actually crunched the numbers:

The bottom one-fifth of Oklahoma taxpayers -- those earning less than $16,600 per year -- would be paying on average $250 a year more in taxes -- or about 2.5 percent more of their income.

The middle 20 percent -- those earning between $30,000 and $50,000 per year -- would be paying on average $293 more in taxes -- or about .8 percent more of their income.

The top one percent -- those earning over $357,000 per year -- would pay $7,900 less in taxes overall.

All told, 67 percent of Oklahomans would pay higher taxes under this plan -- one of a myriad of possible scenarios that will be fed into the sausage-grinder known as the state Legislature that reconvenes Feb. 6.

As wonderful as tax cuts sound, they are like many things in the public policy realm: the devil is in the details.

You might ask yourself, for example: Why are state lawmakers, the governor and big monied interests like the State Chamber so obsessed with eliminating the state income tax?

The answer can be found in who benefits the most.

You might think your elected officials are looking out for the interests of the majority. You would be wrong. At least not all are. The old saying money talks and bulls -- walks is apropos. The wealthiest interests pour the most money into state political campaigns and stand to gain the most in tax savings.

Even if you're not dismayed that the top 1 percent will realize thousands of dollars in tax savings while you pay hundreds more, it's worth contemplating what this state would look like -- as some extreme rightwingers hope -- we shrink government to the size where the rest can be drowned in a bathtub.

What, for example, will your public schools look like? State lawmakers already have made double-digit cuts in common ed. Bonuses promised to the state's elite National Board Certified Teachers have been suspended.

Consider this, as well: More than 6,000 developmentally disabled are on waiting lists for state help.

Few have a better understanding of the full impact of eliminating the state income tax -- both on individual taxpayers and on state services -- than the Oklahoma Policy Institute's David Blatt, a former state Senate budget analyst who now is the state's premier non-partisan fiscal policy analyst.

"Those tax cuts aren't free," he says. "Connect the dots: There's going to be a tax cut, but at what cost? What's the tradeoff?"

Where we're likely headed for is a series of tax tradeoffs that are far less appealing in reality than eliminating the state income tax is in theory.

How does a statewide property tax sound to you? Higher ad valorem taxes? New or higher taxes on real estate transactions, building materials, attorney fees, accounting services, advertising, plumbing services?

What's in the mix may depend on who exerts the most pressure at the state Capitol. Energy interests? Newspaper publishers? Building contractors? Or -- imagine this! -- rank-and-file citizens who won't be able to compete financially with well-heeled special interests, but who have the numbers to make venal lawmakers pay dearly.

The task force that spent months studying the issue has all but completed its work -- unfortunately, much of it behind closed doors (open meetings, anyone?) and without public debate over each potential piece of the taxing puzzle.

Now the work shifts to the full Legislature -- a Republican-controlled Legislature whose leaders have prattled endlessly about their commitment to transparency.

If they're true to their word, the 2012 session might finally awaken the silent majority to what's happening to them at N.E. 23rd and Lincoln Blvd. in Oklahoma City.

--Arnold Hamilton is editor of The Oklahoma Observer; www.okobserver.net