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Editorial: Economic headwinds should prompt restraint on tax cuts

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Oklahoma lawmakers are considering income tax cuts and an elimination of the state grocery sales tax during this month’s special session.

With pressure of the June 28 primary elections building, lawmakers worked overtime in this month’s special session to produce legislation that smacks of bad fiscal policy.

Prompted by Gov. Kevin Stitt’s challenge to enact what he calls “inflation relief,” the state House of Representatives passed bills for income tax cuts and elimination of the state grocery sales tax. These proposals would cost the Oklahoma treasury about $500 million a year.

Some iterations of these tax cuts could make them periodically up for review, while others would make them permanent. Ideas to pay for these tax cuts include using reserve funds and slashing $240 million from the Oklahoma Health Care Authority, which administers the state’s Medicaid programs.

We understand that politics is often a business driven by the urgency of the now. But those same forces often make elected officials prisoners of the moment, and state senators thinking about taking up these proposals should keep this in mind.

Senate Appropriations Committee Chairman Roger Thompson said he fears that recent state revenue growth could dry up if current economic headwinds push the country into recession.

This is a real fear, as many have speculated that the U.S. Federal Reserve may continue pushing policies that slow or even negate economic growth in an effort to stymie high inflation.

Should that happen, state revenues would be likely to fall, leaving Oklahoma in precarious budget waters. It was just a few years ago that Oklahoma went into revenue failures linked directly to a downturn in the energy industry, then the COVID-19 pandemic.

Steep agency budget cuts and a downgrading of Oklahoma’s bond rating objectively hurt the state and cost people jobs. In many ways, the state still hasn’t recovered, as many key state agencies remain understaffed, their workers underpaid and Oklahomans underserved. These are in addition to an ongoing, crisis-level teacher shortage.

If new tax cuts go through during a recession, Oklahoma could burn through its reserves and face a revenue failure nightmare once again.

History should be our guide here. We should not make the same mistakes we’ve made in the past, especially when those errors are so recent and easily quantifiable.

In the past, we have advocated for fiscal responsibility. In this case, that means safeguarding revenues we bring in during good times so there are ample resources to weather the bad.

We’d also argue that slashing the OHCA’s funding is no way to pay for tax cuts. Weakening an agency that provides health care to the state’s most vulnerable seems like a cynical way to manufacture a campaign trail talking point on taxes, especially so soon after voters approved Medicaid expansion.

There are discussions to be had about tax policy, state budgets and how to give Oklahomans the services they want and need. Oklahomans should not be overtaxed. But given our state’s already low tax burden and urgent needs, we are urging restraint.

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