POSTED ON DECEMBER 29, 2010:
Tax cuts have yet to deliver as promised
As the curtain falls on 2010, the state's elected officials are falling all over themselves in a bipartisan fit of self-congratulation.
Despite colossally mismanaging the taxpayers' money in recent years, they are popping champagne corks over the latest revenue estimates that suggest the projected 2012 budget shortfall is shrinking -- down to a mere $226 million.
Of course, that number doesn't include hundreds of millions of dollars in unpaid bills (think state pensions) or a history of broken promises to fund education at the regional average.
Nor does it include another quarter-percent cut in the state income tax -- an estimated $61.5 million hit -- that is scheduled to automatically kick in next year because the state's revenue picture has brightened.
Woo-hoo! Celebrate good times! We're only $226 million in the hole. What's another $61.5 million between friends?
The "good news" spin also conveniently overlooks the fact that our projected 2012 revenues and spending are nowhere near pre-recession levels, thanks to average 15% across-the-board cuts necessary to weather the worst economic collapse since the Great Depression .
What did those budget cuts wrought? Under-funded, over-crowded prisons on the brink of collapse and child welfare and mental health services stretched to the breaking point, just to name a few.
I don't know about you, but my costs haven't dropped 15%. The utility companies providing gas and electricity to my home didn't offer to reduce my bills. Nor did my home or auto insurers.
In fact, I've felt the pinch of climbing gasoline prices in recent weeks. And, oh, yeah: My health insurance premium is going up again next year -- third time in 14 months despite no change in my health status.
It doesn't take a rocket scientist to calculate it's going to cost more in the months ahead to house and care for our ridiculously high corrections population, slap bandages on our crumbling bridges and roads, and keep the lights, heat and air on in our public schools.
Rather than face our state's deteriorating financial picture head-on, far too many of our elected state leaders have taken up residence in a fantasyland. They bitch incessantly about Washington not living within its means and not paying its bills -- because they know such carping plays well in Paoli and Ponca City. Yet they employ the same shell game -- insisting you can cut taxes, raise revenues and improve state services, all at the same time.
Gov.-elect Mary Fallin, incoming House Speaker Kris Steele and Senate President Pro Tem-to-be Brian Bingman are smart, capable people. But they should have asked Santa for stronger backbones. Maybe then they would have had the political courage to stop the automatic tax cut in its tracks -- ensuring time, for example, to review $5.8 billion in tax breaks, many of which are questionable, at best.
Instead, they knuckled under to the noisiest, most radical elements in the Republican base, fearing they would be targets of around-the-clock attacks for approving a tax "hike."
You see, in Lunatic Land, delaying a tax cut until your financial house is in order isn't prudent -- it's the same thing as raising taxes. In that alternate universe, nothing short of eliminating the state income tax is acceptable.
Already, a rookie state senator from Oklahoma City has introduced legislation that would phase-in another one percentage point drop in the state income tax over the next decade.
"Ultimately, the goal should be to eliminate the income tax in Oklahoma altogether," says Sen. David Holt, a Republican. "But, I think in the meantime, we need to send the message that even in tough budget times, we are not abandoning that goal. I recognize there is uneasiness about our current budget situation, but these proposed cuts are incremental, begin at least two years from now, make a small impact each year, and their passage would immediately continue the steady progress towards a promise Oklahoma Republicans have made for a generation.
"With passage of this type of legislation, combined with other pro-business initiatives like tort and workers' comp reform, we have the opportunity to make a bold statement to the nation that Oklahoma is serious about creating the best climate for business. Right now, we're not sending that message, as 21 states have lower income tax rates. Returning tax dollars to our citizens will grow the economy, and also act as a check on the growth of government."
Hmmmm. If I had a dollar for every time Oklahoma's elected leaders declared the state "open for bidness" (that's Okie for "business") the last 15 years, I could retire to Margaritaville.
Remember right-to-work -- the union-busting constitutional amendment? Gov. Frank Keating claimed that if we approved right-to-work, ensuring no one is "forced" to join one of those evil, corrupt unions, a tsunami of high-paying jobs would rush into the state, propelling Oklahoma to the economic Promised Land.
We're still waiting.
Since 2004 when they took control of the state House, Republicans have worked incessantly to reduce the state income tax, never explaining how they would replace more than $2 billion in state revenue needed to fund essential state services. Roads don't magically appear, after all.
In concert with Democratic lawmakers and Democratic Gov. Brad Henry, our elected leaders rammed through $771 million in tax cuts, at the same time they doled out hundreds of millions of dollars in corporate welfare -- all with assurances that if we just share the taxpayers' largesse with private enterprises and cut income taxes, new high-paying jobs will be created.
We're still waiting.
It's worth noting that while Oklahoma does have a higher income tax than 21 other states, our overall tax burden -- combined state and local -- is in the Bottom 10. Ask yourself this question: Would you rather pay higher income tax (the fairest tax there is), higher sales taxes (which disproportionately affect the poorest among us) or higher property taxes (think about seniors on fixed incomes)?
The truth is, the richest Oklahomans stand to benefit the most from the elimination of the state income. Next year's quarter-percentage-point cut illustrates perfectly: The poorest of the poor, about 40 percent of state taxpayers, won't see any benefit because their incomes are so low they hardly pay any tax anyway. The middle 20 percent will realize between $2 and $4 a month in income tax savings. The bulk will go to the state's upper crust.
As state Sen. Jim Wilson, D-Tahlequah, put it, "This tax cut is not in a vacuum. That's what galls me more than anything. They pretend this is going to be useful, but it's not. If they were giving $120 million to poor people I could support that. They'd spend it. The ones who are getting it are probably going to save it. The bottom 60 percent aren't going to get anything."
Here's a pertinent question: What would really attract good, high paying jobs to Oklahoma? Despite the incessant ranting of the silk-stocking, State Chamber crowd, it's not lower taxes. It's a strong education system, excellent transportation resources and a superb quality of life that's at the forefront of those considering business relocations.
Oklahoma City learned this lesson in the late 1980s and early 1990s. The voters offered to tax themselves to build huge airline maintenance facilities that would generate high-paying jobs with excellent benefits. When it didn't land the facilities, Oklahoma City figured out it was being played by the big airlines to cut sweeter deals with other cities (think United Airlines and Indianapolis).
So Oklahoma City leaders moved a different direction. They convinced the taxpayers to invest in themselves instead, creating a quality of life that would be attractive to businesses looking to expand. Southwest Airlines and Dell moved operations to Oklahoma City in no small part because it was suddenly a much better place to live, a place where executives and their families could comfortably call home -- a revitalized Bricktown and canal, a new sports arena and baseball park, a state-of-the-art downtown library and a rebuilt concert hall. Big 12 basketball tournaments followed. So did a National Basketball Association team.
"We have to decide," Wilson says, "if a dirt road brings more business into the state than a hard top. Or if a poor education brings more business into the state than a good education."
-- Arnold Hamilton is editor of The Oklahoma Observer; www.okobserver.net
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