Policymakers and other opinion leaders often make inaccurate statements to justify continued cuts in income taxes and other important federal and state revenue sources. As a result, our governmental entities have diminished resources to provide core services such as public education, public safety, disaster recovery, services for the less fortunate and those with significant physical and mental health needs.
Misleading statements include: U.S and Oklahoma citizens pay too much in taxes for services. Oklahoma is a poor state. The private sector and philanthropic resources can address the public investment shortfall.
The facts tell a different story. In 2015, federal and state taxes were 26.4 percent of the gross domestic product compared to the 34.3 percent average for the 35 countries in the Organization for Economic Cooperation and Development. Oklahoma’s 2015 tax burden was 11.5 percent of private sector personal income, well below the average of 14.4 percent for all states. In 2016, Oklahoma’s per capita personal income was $45,682, or 28th in the nation. Total government spending (federal, state, city) for 2017 is estimated to be $6.97 trillion, while total charitable giving in 2016 was $390 billion, or 5 percent of total government investment.
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The facts make clear that federal and Oklahoma policymakers can increase investments in vital services with revenue enhancements while maintaining competitive tax policy. This is the only choice as philanthropic and other private-sector sources do not have the capacity to scale up and make up the percentage cuts in public investments.
The lack of public investment in important services has been accompanied by rising income inequality that compounds the burden on lower-income families. Over the last three decades, higher-income families have seen a significant wealth increase while lower-income brackets have suffered from economic stagnation or worse. According to the Congressional Budget Office, from 1979 through 2007 the top 1 percent of households increased their after-tax income by 275 percent while the 60 percent of middle-income households saw a gain of only 40 percent.
The inequality in family income has only increased since 2007 due to several factors, with some of the reasons the responsibility of policymakers. These include cuts by many states, like Oklahoma, to the top income tax rate. Cutting the top income tax rate benefits the wealthiest while putting a greater obligation on lower income taxpayers. In addition, our state’s overly generous corporate tax credits and the gross production tax giveaway of 2014 have furthered our revenue hole.
What to do? We must not let policymakers disregard facts when debating and shaping policy and budgets. The Oklahoma budget crisis has been well documented and reasonable options for fair revenue enhancements have been identified.
Steps to address growing income inequality and provide adequate government investment dollars in our country and state should include revenue enhancements that restore a better sense of progressivity to our tax system, ensuring that those with the ability to support vital services pay their fair share. Restoring fair tax policy is particularly important in Oklahoma. Our extremely high reliance on sales taxes while cutting top income tax rates and reducing corporate contributions has led to an unfair and unbalanced tax policy.
Sadly, to date, political leadership has been lacking to implement these steps and others that would put us on a path toward a lasting solution. It is hard to fathom why some elected officials refuse to consider balanced and progressive revenue increases when their area schools and colleges are suffering, public safety and mental health needs have been severely compromised, and their hospitals are on the brink of collapse or have already closed.
When revenue increases are needed, as in Oklahoma, we should insist that progressive tax policy lead the way and fix past decisions that have been overly generous to the higher-income taxpayers and certain corporate interests. And those of us who are more fortunate must help amplify the voices of the underserved and underrepresented who may not have the ear of their elected officials.
Dennis Neill is senior program officer for the Charles and Lynn Schusterman Family Foundation and a member of the Tulsa World Community Advisory Board.