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Dissecting OK’s Tax Code

Filed by Michael Cross in Feature, Local News.
February 1, 2012

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If you’re like most Oklahomans, this time of year you’re focusing on your income taxes returns.

Maybe you’re hoping to get a refund or at least not being hit too hard by the IRS.


That’s the estimate from the Oklahoma Policy Institute of how much an average Oklahoman gives in taxes out of every dollar earned.

State Treasurer Ken Miller describes our tax code as a quilt.

A quilt that has been added to over the past 105 years.

“It’s certainly not a system that one would design if they were going to sit down at a table and design a system that is fair, that is equitable, that is low, and that is encouraging to economic growth and productivity and entrepreneurialism.”

So, how’d we get here?

Well it started out at statehood mostly just with property taxes.

Then came cars and roads requiring a gas tax in the 20s, followed by sales taxes and income taxes in the 30s as the economy changed from just agriculture.

Oklahomans started moving away from farms and into the city to get jobs.

Rather than taxing the property owned by farmers and ranchers, the state needed to tax income from the jobs Oklahomans were now acquiring.

Urbanization changed everything as well.

When the state was new, people in need who lived in small communities could get help from the church and neighbors.

But, in the big city, those people turned to government assistance which required the state to raise money to pay for it.

Basically, lawmakers were changing the quilt to adapt with society according to Bob Blackburn at the Oklahoma History Center.

“We try to predict where the economy is going. What can we do to stimulate more growth? What can we do to take care of those who can’t take care of themselves? How can we improve the quality of life? How can we be fair and equitable? And, trying to find this balance with all of those goals is a difficult and a messy process.”

And we’re still adding to that so-called tax quilt.

One bill under consideration this session would require internet-only companies to pay sales taxes.

But adding pieces to the quilt got a whole lot harder in 1992, when Oklahomans passed State Question 640.

Now, taxes can’t be raised unless voters approve it or three-fourths of the state legislature can agree.

Former Senate Appropriations Chairman and President Pro Tem Stratton Taylor says State Question 640 changed the way lawmakers could adapt.

“I always thought it was much like if we did operate like a business where in good years you gave a dividend, meaning a tax cut, and in bad years you took away the dividend. But that meant you were raising income.”

Income taxes do make up a third of all local and state taxes, but there’s also sales and property taxes.

Most of the money heading to state and local coffers comes from an equal mix of property, sales and income taxes.

That system is actually pretty common in our region according to David Blatt, the executive director of the Oklahoma Policy Institute.

“Income and sales taxes tend to be the top two broad categories of taxes. Oklahoma is a very low property tax state. We are somewhere between 45th and 47th in property taxes.”

A National Council of State Legislatures study shows Arkansas and Kansas use similar distributions of sales, income and property taxes.

But Texas is another story.

While the Lone Star State has no corporate or personal income taxes, it does depend on property and sales taxes to make up 86% of revenue.

Most agree the idea of completely overhauling our tax code will take some time, but Treasurer Miller says Oklahoma is just starting the conversation to change the system.

The Oklahoma Policy Institute’s 10 things you should know about Oklahoma’s Budget and Tax System

A presentation given by the National Council of State Legislatures on Oklahoma’s Tax Structure.Oklahoma Presentation 9-15

2 Responses to “Dissecting OK’s Tax Code”

  1. Christine Crenshaw says:

    Thank you for this feature. The link to the Oklahoma Policy Institute is very helpful. Please keep up the good work. Providing a comparison of the regressivity or progressivity of income tax, sales tax and property tax could be helpful and appreciated. Christine Crenshaw

  2. jasonjimmy says:

    This is a good piece, but it's worth pointing out a loophole in the system, that permits taxes to be levied without the legislature's involvement at all. Just look to our Corporations Commission. To support the Universal Service Fund (an outdated concept in its own right that supports land lines at the expense of cell phones) the OCC can impose 'fees' (read taxes) on our cell phone bills. this is not a legislative process, but it hits our pocket books just as hard, and seems to me to discourage innovation.

    Luckily the Corporations Commission just declined the opportunity to make this happen, I guess ignoring the heavy lobbying of some land line providers. But this is a loophole that needs to be closed. Can't the legislature step in to shut this process down? Cap the Universal Service Fund or something along those lines?

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