POSTED ON APRIL 11, 2012:
You Get What You Pay For
Dropping the state income tax may be a bold experiment but if it doesn't work, it can't be fixed
In the great debate over eliminating the state income tax, one question -- arguably the most important question -- goes unanswered.
How would you replace the lost billions in state revenue?
The reason no one in a position of power offers a plausible answer is that there is no politically palatable answer.
You really want to pay 20 percent or more in sales taxes when buying milk for your babies? You really want your property taxes to skyrocket? You really want your driver's license or vehicle tag fees to double or triple or ... ?
That is the unappetizing prospect if a tiny, greedy, powerful elite gets its way and the state income tax is abolished.
Hyperbole? No doubt some will assert there's plenty of waste and fat in state government, certainly enough to offset much of the lost revenue.
This line is packaged and sold, Madison Avenue-style, as "allowing you to keep more of your hard-earned money."
What's not to like? You do want leaner, more efficient government, right?
Psssst -- may I let you in on a little secret? We already operate the leanest, most efficient state government around.
Lest you think I'm deranged, consider this:
Oklahoma is dead last -- 50th -- in combined state and local taxes and scraping the bottom in per capita spending on most state services.
So don't complain to me about the nation's worst bridges or exploding school class sizes. You get what you pay for.
Ironically, what we're getting is often beyond what we deserve.
Example: Five years ago, before Republicans won control of both legislative houses and the governorship, their leaders demanded an independent audit of the state corrections system.
They were convinced it was bloated and inefficient and would be better off in the hands of private enterprise.
(Of course, it just so happens that private prisons were among the biggest contributors to the Oklahoma GOP's campaign coffers. Surely this is coincidence.)
Republican lawmakers were allowed to pick the auditor -- a Florida-based firm known nationally for its work in corrections. Nearly $1 million of the taxpayers' money was spent on the thorough going-over of the state prison system.
The finding? Corrections is doing a helluva job considering it is woefully under-staffed and under-funded.
The recommendation? Increase the budget of a lean, efficient agency.
The legislative response? (Crickets.)
History is repeating itself with the state Department of Human Services, one of the Legislature's favorite punching bags.
Former director Howard Hendrick, himself a fiscal conservative and ex-GOP state senator, begged for years for more money for a woefully under-staffed operation -- workers juggling 10 times the national average in child welfare cases.
Now we learn it will cost an estimated $150 million a year to fund an improvement plan to get DHS where it needed to be all along.
So the question that demands an answer is: how are we going to pay for all these things if we cut taxes another $2 billion (the personal income tax represents one-third of all state revenues)?
Alexander Holmes, a University of Oklahoma economics professor, says the no-income-tax scenario keeps him awake at night.
The reason? It's an experiment in government financing that cannot be fixed if it doesn't work.
Speaking last week at a forum sponsored by the Tulsa-based Oklahoma Policy Institute, Holmes pointed out that once taxes are cut, it's nearly impossible to restore them, thanks to State Question 640.
That was the constitutional amendment -- approved by state voters in March 1992 -- that prevents a tax hike without approval of either a super-majority of both legislative houses or the voters.
Can you imagine getting three-fourths of the Oklahoma Legislature on the same page on any substantive issue? Can you imagine the taxpayers in today's toxic, polarized political environment approving a tax increase for anything?
"There is no understanding of the built-in constraints," Holmes said -- noting the irony that so many legislators fancy themselves as strict constitutionalists when it appears "no one is reading the (state) Constitution."
Holmes can't be easily dismissed as some sort of pointy-headed ivory tower-type. He's actually served in the state government trenches, helping balance the state's budget as former Gov. Henry Bellmon's state finance director.
And if future legislatures and governors concluded the no-income-tax experiment was a disaster? They'd have to figure a way around the statewide vote or super-majority.
In other words, Holmes said: "If you break it, you can't fix it -- and that is the bottom line."
Justin McLaughlin, vice-president of economic development at the Tulsa Metro Chamber, and Roy Williams, CEO of the Oklahoma City Chamber, both warned at the OKPolicy forum that the state's No. 1 economic development incentive -- Quality Jobs -- could be jeopardized because it is financed directly from income taxes.
McLaughlin also pointed out that state income tax rates do not appear among the Top 25 reasons that businesses list when considering where to relocate or expand.
There are only two obvious reasons that a small group of wealthy elite is pushing this.
They are greedy -- they have the financial power to stampede the Legislature and governor into embracing a reverse Robin Hood scheme that shifts the cost of public services from their bottom lines to the middle class and poor.
Or they are anti-union -- hoping to destroy government as we know it (with many of its workers engaged in collective bargaining) in order to create a new world order in which the plutocrats reign over the lowly, scarcely paid public servants.
It's an experiment that definitely isn't worth the risk.
URL for this story: http://www.urbantulsa.comhttp://www.urbantulsa.com/gyrobase/Content?oid=oid%3A48650