Dear Friend, As you may know, earlier this month a coalition of business and civic leaders and organizations released the Step Up Oklahoma plan, a comprehensive proposal aimed at stabilizing Oklahoma’s budget and reforming state government. In our blog post examining the Step Up Oklahoma plan, OK Policy recognizes that is is a serious attempt to address budget problems that have plagued our state for years. The Step Up coalition has recognized that Oklahoma's structural budget deficit can only be fixed through approval of new permanent revenues. Overall, the coalition has proposed a balanced mix of new revenues, which include a $1.50-per-pack cigarette tax increase, a 6¢ per-gallon motor fuel tax increase, an increase in the initial gross production tax rate from 2 to 4 percent, and changes to the personal income tax. Together, all the revenue proposals are expected to generate $750 million a year, enough to provide a $5,000 raise for all teachers and principals, fill the current budget hole, and generate an additional $367 million to stabilize the budget and fund essential services. However, OK Policy has serious concerns with the plan's income tax proposals, which include ending or limiting a number of deductions while adding two new tax brackets and creating a new credit for low-income households. This approach is unnecessarily convoluted and confusing and would leave over half of all taxpayers earning more than $32,000 per year paying higher income tax. We also have serious doubts that the proposal would generate anywhere near the amount suggested by the Tax Commission. Oklahoma has alternative approaches to income tax reform that would be simpler, more progressive, and provide more certain revenue gains. These would include some mix of restoring the top 5.25 percent rate, assessing a high-income surcharge, ending the capital gains tax break, restoring the full earned income tax credit, and raising the standard deduction. We are hopeful that lawmakers will strengthen the Step Up Oklahoma plan by adopting a better approach to the income tax. In addition, while the porposed governance reforms include some promising ideas - especially the recommendation to lower State Question 640's revenue threshold - the entire package needs greater scrutiny. Click here for our blog post on the Step Up Plan. You may also be interested in the following materials and resources: We welcome your input on the Step Up plan, and we hope that you will make your thoughts known to your Representative and Senator. | Oklahoma Policy Institute
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