Oklahoma’s Fiscal Outlook: Moving from Crisis to Stability July 2012

Oklahoma’s Fiscal Outlook: Moving from Crisis to Stability

July 2012

David [email protected]

(918) 794-3944

mailto:[email protected]

Oklahoma’s Path to Prosperity

What does Oklahoma need to be a prosperous state?


What Prosperity Looks Like Good-paying jobs Well-educated, well-trained workforce -

Quality education system from early childhood to post-secondary

More college graduates Well-functioning infrastructure Healthy communities -

Access to timely and affordable care Public health

Safe streets Stable safety net for those in need


We’re In This Together Successful outcomes for our families, businesses

and communities depend on effective public structures and systems

Government is among our means of achieving our common goals as a state – alongside private businesses, non-profits, philanthropies, faith groups, and families

Oklahoma’s Path to ProsperityWe Lag Behind

We fall short in many of our common goals: Students in bottom third in reading and math proficiency

(2009) 43rd in share of population with a college degree (22.2

percent, 2008) 46th in overall health; in the bottom 10 states for rates of

smoking, obesity, diabetes, job-related deaths, premature deaths, infant mortality, and days lost to mental and physical illness (2011)

1 in 6 Oklahomans (16.9 percent) and 1 in 4 children (24.5 percent) live in poverty (2010)

4th in total prisoners per capita and 1st in female incarceration rates (2009)

9th worst road conditions

Oklahoma’s Path to ProsperityWe Already Lag Behind

Oklahoma invests less than most states in our public structures.

Education

Health and Social Services

Transportation

Public Safety

Environment and Housing

Utilities

Insurance trusts

OtherTotal

-$1,000

$1,000

$3,000

$5,000

$7,000

$9,000

State and Local Spending per Person by Function, 2007-08

OklahomaUS Average

Spen

ding

per

Per

son

Source: U.S. Bureau of the Census

Oklahoma’s Path to ProsperityWe Already Lag Behind

Four years of budget cuts or flat funding and growing obligations threaten to corrode our public structures and weaken our prosperity

Can we provide a quality education for all students and produce the skilled workforce that businesses need?

Can we fix our crumbling infrastructure?

Can we improve our physical health and well-being?

Can we ensure the safety of vulnerable children and seniors left in our care?

Budget Trends: FY ‘10 – FY ‘13

Budget Trends: FY ‘10 – FY ‘13The Recession Hit in Late 2008

Oklahoma experienced six straight quarters of negative growth (declining state personal income) in late 2008 –2009

Economy has mostly grown faster than the nation’s since start of 2010

2007.3

2007.4

2008.1

2008.2

2008.3

2008.4

2009.1

2009.2

2009.3

2009.4

2010.1

2010.2

2010.3

2010.4

2011.1

2011.2

2011.3

2011.4

2012.1

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Quarterly Change in Personal Income, Oklahoma and National,

4th Quarter 2007 to 1st Quarter 2012

National Oklahoma

% Change from Prior Quarter

Budget Trends: FY ‘10 – FY ‘13State Budgets Hammered

All but four states faced budget shortfalls in FY ‘11.

Budget Trends: FY ‘10 – FY ‘13It’s a Revenue Problem

Five consecutive quarters of worsening collections Revenue dropped more than twice as steeply as in

the previous downturn Revenues recovering over past eight quarters

Q1 FY '02

Q2 FY '02

Q3 FY '02

Q4 FY '02

Q1 FY '03

Q2 FY '03

Q3 FY '03

Q4 FY '03

Q1 FY '04

Q2 FY '04

Q3 FY '04

Q4 FY '04

Q1 FY '05

Q2 FY '05

Q3 FY '05

Q4 FY '05

Q1 FY '06

Q2 FY '06

Q3 FY '06

Q4 FY '06

Q1 FY '07

Q2 FY '07

Q3 FY '07

Q4 FY '07

Q1 FY '08

Q2 FY '08

Q3 FY '08

Q4 FY '08

Q1 FY '09

Q2 FY '09

Q3 FY '09

Q4 FY '09

Q1 FY '10

Q2 FY '10

Q3 FY '10

Q4 FY '10

Q1 FY '11

Q2 FY '11

Q3 FY 11

Q4 FY 11

Q1 FY 12

Q2 FY 12

Q3 FY 12

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

-12.1%

-29.5%

16.1%

5.7%

Quarterly Year-over-Year Change in General Revenue Collections, FY '02 - FY '12


FY ‘10 General Revenue 23 percent below FY ‘08 pre-downturn levels

Revenues increased by 10.5 percent in FY ‘11 and are projected to rise 8.1 percent in FY ‘12 – but to remain below pre-downturn levels through FY ‘13

FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 FY '11 FY '12 (proj.)

FY '13 (est.)

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$4,717 $4,408 $4,174$4,616

$4,966$5,701 $5,935 $5,953

$5,544

$4,621$5,138

$5,555 $5,600

Annual General Revenue Collections, FY '00 - FY '13


Tax Cuts Had a Long-Term Impact Tax cuts were large, permanent, and back-loaded Tax cuts were stretched out over several years; full

impact will not be felt until FY ’13 Major cuts were almost all to the personal income tax

Lost Revenues from Select Tax Cuts Enacted 2004 - 2006 FY'05 through FY'10 (in $ millions)

$18.7$144.8

$333.3

$561.8$651.1

$776.9

$0.0$200.0$400.0$600.0$800.0

FY'05 FY'06 FY'07 FY'08 FY'09 FY'10source: Oklahoma Tax Commission

Budget Trends: FY ‘10 – FY ‘13

Tax Collections Are at Historic Lows In FY ‘10 tax collections equaled 5.5 percent of state

personal income, compared to 7.2 percent in FY ‘01 Tax collections have not kept pace with personal income

since FY ‘06

Sources: State personal income from Bureau of Economic Analysis; Tax collections from Annual Executive Budget

1982

19

84

1986

19

88

1990

19

92

1994

19

96

1998

20

00

2002

20

04

2006

20

08

2010

-

1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000

5.0%5.5%6.0%6.5%7.0%7.5%8.0%

Oklahoma State Taxes, Total and as Share of Personal Income, FY '82 - FY '10

State Tax Collections Tax Collections as % of State Personal Income

It’s a Revenue Problem

Budget Trends: FY ‘10 – FY ‘13Budgeting Through the Crisis

Three consecutive years of declining appropriations (FY ‘10 –

FY ’12) followed by modest increases (FY ‘13) FY ‘13 appropriations of $6,855.8 million:

$253 million, 3.8 percent, above FY ‘12 $269 million, 3.8 percent, below FY ‘09

See FY ‘13 Budget Highlights at:http://okpolicy.org/files/FY13Highlights.pdf

$6,217

$6,760

$7,043

$7,095

$5,897 $5,938 $6,404

$6,856 $30

$838$554

99

$224 $273 $100

$4,000

$4,500

$5,000

$5,500

$6,000

$6,500

$7,000

$7,500

FY'06 FY'07 FY'08 FY'09 FY '10 FY '11 FY '12 FY '13

State Appropriations, FY '06- FY '13 (in $ Millions, includes supplementals, excludes Rainy Day "spillover" funds)

State Revenues Federal Relief Rainy Day Fund

Total=$6,603


Just under 90 percent of appropriations consistently goes to 10 agencies that provide core services

Over 65 agencies share remaining funding

Common Ed.; 2278.2; 35.0%

Higher Ed.; 945.3; 14.5%

OHCA (Medicaid); 983.1; 15.1%

DHS; $537 ; 8.3% Corrections; 459.8; 7.1%

Transportation; 106.7; 1.6%

Mental Health; 187.2; 2.9%

Career Tech; 133.7; 2.1%

Juv. Affairs; 96.2; 1.5%Public Safety; 84.5;

1.3%

All Other Agencies; 698.600000000001;

10.7%

FY '12 Appropriations: Total and 10 Largest Agencies (excludes supplementals)

Total Appropria-tions: $6,510.5 million

Total Ten Largest: $5,811.9; 89.2%

Notes:Transportation also received $70 from bond issue;OHCA excludes revenue from hospital provider assessmber (SHOPP)


Budgets for three straight years (FY ‘10, FY ’11 & FY ‘12) involved variations on a theme:

Large shortfalls in projected revenues Fear of devastating budget cuts Use of non-recurring revenues to partly bridge the budget

gap Budget cuts across state government but less severe for

core education, health, human services, and public safety agencies

Budget Trends: FY ‘10 – FY ‘13Budgeting Through the Crisis: FY ‘10 –

FY ‘12 Governors Henry and Fallin and the Legislature used various revenue enhancements to bridge budget shortfalls and reduce the severity of cuts: Revenue enhancements totaled close to $3 billion over 3

years Half from federal stimulus bills; remainder divided

between Rainy Day Fund, cash transfers, enhanced tax compliance, and suspending and deferring tax credits

Most new revenues were one-time/non-recurringBudget cuts for almost all agencies for 3 consecutive years Some 40 agencies – more than half of all appropriated

agencies –absorbed cuts of greater than 20 percent Cuts to some key health, human services, education, and

public safety agencies were less severe

Budget Trends: FY ‘10 – FY ‘13Budgeting Through the Crisis: FY ‘13

Total appropriations increased by $253 million (3.8 percent) from FY ‘12

Most agencies will receive flat funding in FY ‘13 46 of 78 appropriated agencies will receive the same amount

or less Several agencies received funding increases for targeted

priorities, including: DHS for the child welfare reform plan Transportation to fill budget holes after end of bond issues Health Care Authority for Medicaid expenditure growth Mental Health and Corrections for criminal justice reforms

Education agencies received no additional funding or very small increases Support for public schools through the state aid formula held

flat


No agencies have been funded to cover rising operating and employee benefit costs

State government workforce has shrunk by 9.8 percent compared to FY ‘09 and is 4.4 percent smaller than in FY ‘01

Staffing cuts have been especially severe for correctional facilities

FY-01 FY-02 FY-03 FY-04 FY-05 FY-06 FY-07 FY-08 FY-09 FY-10 FY-11 FY-1220,000

25,000

30,000

35,000

40,00037,139 37,486 37,684

36,723 37,403 38,231 38,834 38,924 39,35038,154

36,081 35,504

State Employee FTE Count by Fiscal Year Average, FY 01 - FY '12 (excluding Higher Education; FY '12 YTD Apr)

Budget Trends: FY ‘10 – FY ‘13Impact of Cuts

State appropriated spending reached its lowest level in at least 30 years in FY ‘11– and has likely fallen even further this year

Budget cuts and funding shortfalls continue to affect Oklahoma students, teachers, public employees, non-profit organizations and private sector businesses

1980

19

82

1984

19

86

1988

19

90

1992

19

94

1996

19

98

2000

20

02

2004

20

06

2008

20

10 4.5%5.0%5.5%6.0%6.5%7.0%

Appropriated Budget as % of State Personal Income, Oklahoma, FY '80 - FY '11

Sources: State personal income from Bureau of Economic Analysis; Appropriations from various sources

Budget Trends: FY ‘10 – FY ‘13Impact of Cuts: Education

State aid funding has declined by $214 million since FY 2008 while public school enrollment has increased by over 24,000 students.

Almost 1,000 fewer teachers than in 2008, leading to larger class sizes and reduced class offerings.

Department of Education eliminated funding for adult education, alternative education, research-based teacher training programs, evaluation contracts, and other programs.

Despite new testing requirements, funding reduced for ACE remediation and eliminated for Reading Sufficiency in FY ‘13.

FY ‘12 budget initially failed to fund full year of health care benefits and stipends for board-certified teachers.

Common education has fallen to lowest share of state appropriations since at least FY ‘00

Budget Trends: FY ‘10 – FY ‘13Impact of Cuts: Health and Human

Services In the past three years, the Health Department has been cut by 20 percent, forcing layoffs for at least 300 employees.

Health Department eliminated 17 child guidance centers serving pre-school children with developmental delays;

Department of Mental Health and Substance Abuse Services reduced beds and closed centers for children’s mental health and adult substance abuse, cut contracts to all providers;

Over 6,000 families on waiting list for developmentally-disabled home and community based waiver program;

Significant reductions in counseling programs for abused women and children and prenatal education for low-income mothers;

Office of Juvenile Affairs cancelled youth detention and gang prevention programs.

Budget Trends: FY ‘10 – FY ‘13Impact of Cuts: Other Areas

The Department of Corrections remains critically understaffed. Stress from being required to work frequent double-shifts is leading to high turnover. Often just one officer may be on duty in a dining hall of 160 inmates.

The number of state troopers on Oklahoma highways is at its lowest level in 22 years.

The state owes $36 million to more than 600 cities, counties, electrical cooperatives, state agencies, fire districts, schools and Indian tribes for its share of costs associated with 21 natural disasters dating back to 2007.

State workers have not received a pay increase in 6 years. The number of state workers has dropped by 3,804 (9.8 percent) since FY ‘09.

Budget Trends: FY ‘10 – FY ‘13Impact of Cuts

Oklahomans expect state government to: educate our children train our workforce maintain our infrastructure protect our communities aid our most vulnerable family members and

neighborsHave years of underfunding and the extended period of flat funding and cuts shrunk state government to the point where it is no longer capable of performing these core functions?

The Challenges We Face

The Challenges We FaceAn Incomplete Recovery

Monthly General Revenue collections above the same month for the prior year in 24 of last 25 months

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

-8%

-22%-19%

-21%

-28%-30%

-26%

-32%-30%

-24%

-31%-29%

-17%

-7%

1.6%

0%

6%

2%

10%

5% 6%3%

9%13%

20%

12%9%

13%10%

16%

5%

18%14%

6%

23%19%

7%

15%

-1%

6%4%

Change in Monthly General Revenue Collections, Compared to Same Month Prior Year, Jan '09 - May'12


FY ‘12 revenue collections through May up 21 percent from FY ‘10 but still 7 percent below FY ’07

Revenues still below nominal levels of 6 years ago

FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 FY '11 FY '12$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

4,2694,001

3,7484,191

4,431

5,1215,348 5,321 5,077

4,1234,532

4,982

July-May General Revenue Collections,FY '01 - FY '12 (in $Millions)


Substantial demands on scarce resourcesShort-Term – In a hole

Need to restore cuts of past three years and pay for ongoing operating costs of state government

Strengthen our child welfare system in accordance with settlement agreement

Thousands with developmental disabilities and mental illness on the waiting list for services

Long-Term – Structural deficit Hazardous physical infrastructure – roads, bridges, state

buildings Water infrastructure needs - $80 billion over next 50 years Aging population will require increased health care, social

services spending Unfunded pension liabilities still exceed $10 billion


Projected Annual Budget Surpluses and Deficits Before and After 2004-2006 Tax Cuts (2007 to 2035)

(2,500)

(2,000)

(1,500)

(1,000)

(500)

0

500

1,000

2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035Year

Mill

ion

$200

5

Before Tax Cuts

After Tax Cuts

Growing Long-Term Obligations Oklahoma faces a ‘structural deficit’

Normal growth of revenues is insufficient to finance the normalcost of services year after year.

Source: Projections conducted in 2007 by Dr. Kent Olson, Professor of Economics, Oklahoma State University

Growing Long-Term ObligationsFederal Deficit Reduction Will Compound State Problems

Budget Control Act established caps on discretionary spending though 2021 to reduce federal deficits by $917B

Failure of “Super Committee” to agree on deficit reduction measures triggered automatic procedures to reduce spending by $1.2 trillion

Exempts Medicaid, mandatory programs Half the cuts would be from defense budget Discretionary programs facing 9 percent cuts

Includes all education and worker training funding streams, many social services and health grants, agriculture, environment, others

Effective January 2013


The Challenges We FaceA Fiscally Responsible Course

You have to be sure you're right before cutting tax rates or shrinking the tax base. The Legislature and the governor cannot say in following years, ‘Oops, we made a mistake.’

- Larkin Warner, OSU Regents Professor of Economics, Nov. 2011

Whatever our tax structure is in Oklahoma, it’s doing a good job of not holding us back, and on the other hand we don’t want to do anything to mess it up. And that’s what you always have to be careful of when you start getting political solutions to problems that may not really exist.

- Scott Meacham, Former State Treasurer, April 2012

“

“


Preserve the Income Tax The essential cornerstone of a balanced tax system Single largest state revenue source:

$2.2 billion in FY ’10 - 32.1 percent of total collections.

Personal Income Tax,

$2,224.832.1%

Corporate Income Tax,

$216.43.1%

Sales Tax, $1,815.3

26.2%

Gross Production Tax,

$732.210.6%

Motor Vehicle Taxes, $579.3 8.4%

Other, $1,353.6

19.6%

Total State Tax Collections, FY '10


Preserve the Income Tax Largest funding source for state services Based on the share of agency appropriations funded with

income tax revenues, elimination of the personal income tax would leave us unable to pay for:

Salary and benefits for 17,000 classroom teachers; AND Health insurance coverage for 430,000 low-income

children; AND Incarceration of 9,300 inmates; AND Tuition for 19,000 Oklahoma’s Promise students; AND The ROADS transportation improvement plan; AND Many other services and programs across state

government.

See: ‘What the Income Tax Pays For’ at http://okpolicy.org/tax-reform-information


Preserve the Income TaxTaxes are rarely decisive in business investment decisions.

For 24 years, I’ve been conducting interviews with executives of companies that we tried to recruit to Ardmore that ended up locating elsewhere. Not once in all those years did a company that rejected Ardmore base its decisions on taxes.-Ardmore Chamber of Commerce President Wes Stucky, Oct. 2011

I will tell you that state income tax had absolutely no impact in terms of the decision of merging the company and where the corporate headquarters is located.-Phillips Petroleum CEO Jim Mulva, discussing the company’s merger with Houston-based Conoco Inc. and decision to locate its new headquarters in Houston, November 2001

“

“


Preserve the Income TaxIncome tax cuts will not make Oklahoma more competitive

If our ability to educate and train employees for a 21st century economy is damaged through lack of funding, if we can’t maintain our roads and bridges, strong health care system, robust research and technology infrastructure, safe streets, etc., then the benefits of a reduction in the income tax rates may be limited.-Tulsa Metro Chamber Vice President & Former House Speaker Chris Benge, Oct. 2011

I can't sit here and say having no income tax, having low property tax, whatever, is going to make a big difference… We have to have a state that's known for excellence.-Ardmore Chamber of Commerce Pres. Wes Stucky, Oct. 2011

“

“


Preserve the Income TaxOklahoma is already doing better than most states,

including those without an income tax

Third best job growth, #1 best manufacturing job growth (2011)


Preserve the Income Tax Cutting the income tax will create great pressure to

raise sales taxes or property taxes Oklahoma’s average combined state and local sales tax

rate – 8.66 percent – is already 5th highest in the nation (Tax Foundation)

Untaxed Internet sales already cost Oklahoma $185M to $225M annually (OK Tax Commission)

Texas has a higher state sales tax rate (6.25 percent) than does Oklahoma (4.5 percent) and assesses the sales tax on 83 categories of services, compared to 32 in Oklahoma

Every state without an income tax has higher per capita property taxes than Oklahoma

The average Texan pays three times as much property tax as the average Oklahoman


The income tax is essential to tax fairness

Low and middle-income Oklahomans pay more of their income in state & local taxes than do wealthy households

Income tax partly offsets the regressivity of sales and property taxes

Broad-based tax preferences help low-income seniors and families with children

Preserve the Income Tax

The Challenges We FaceThe 2012 Tax Debate

Various tax cut proposals under consideration All would lower the top income tax rate, at least

partly offset lost revenue by eliminating various income tax credits, deductions and exemptions

Plan differed as to: Fiscal impact (revenue-neutral vs. revenue

reduction) Which tax preferences were eliminated Reduction or elimination of income tax Triggers for future tax cutsSee OK Policy’s Summary and Comparison at: http://okpolicy.org/files/TaxPlanComparison.pdf

The Challenges We FaceThe 2012 Tax DebateThe Senate Plan (SB 1623)

Based on 2011 Tax Reform Tax Force recommendations developed by Sen. Mazzei & Rep. Dank

Would have lowered the top income tax rate from 5.25 to 4.75 percent over 2 years

Revenue-Neutral: lost revenue fully offset by eliminating the sales tax relief credit, child/child care tax credit, earned income tax credit and economic development incentives; limited eligibility for personal exemption

Increased taxes for one-third of Oklahomans and shifted more of tax load onto middle-income and low-income households


OCPA/Laffer Plan (HB 3038/SB 1571) Immediately lowered top income tax rate from 5.25 to

3.5 percent Top rate automatically reduced each year until total

elimination (2022) (amended versions included triggers for future cuts)

Eliminated ALL deductions, exemptions and credits, including:

Standard deduction, personal exemption Low-income credits All business income tax credits

Floor substitutes restored exemptions for retirement income, Social Security benefits, veterans income, military pay

Huge revenue loss – while raising taxes for almost half of households


Governor Fallin’s Proposal (HB 3061) Governor’s Oklahoma Tax Reduction and Simplification Plan:

No tax on those making <$15k (single)/$30k (married); 2.25 percent on those from $15 - $35k/$30-$70k; 3.5 percent on those earning >$35k/$70K

Taxes ALL income at same rate – creates a “tax cliff” Eliminates itemized deductions, low-income credits,

deductions for retirement and military income, and almost all economic development credits

Tax cut for most but increase for low- and moderate-income families with children and seniors.

Fiscal impact in first full year of $350 million Further cuts in the top income tax rate in future years

whenever revenues rise > 5 percent until income tax is completely eliminated.


The Final Agreement/Disagreement Governor, Speaker, Pro Tem announced tax cut deal just

prior to final week of session: Top rate reduced immediately from 5.25 to 4.8 percent Trigger to reduce rate to 4.5 percent based on revenue

growth Revenue losses partially offset by limiting eligibility for

personal exemption (to families below $70,000, individuals below $35,000); limiting itemized deductions, eliminating some business tax incentives

Fiscal impact of $33 million in FY ‘13, $102 million in FY ‘14

Tax increase for 24 percent of filers House leadership refused to let bill get heard by full House Senate rejected last-minute House plan Governor opted against special session


How do we create a revenue structure that meets our obligations?

Review and reduce tax credit programs: Income tax, gross production tax credits

Adopt combined corporate reporting Limit itemized income tax deductions Modernize the sales tax:

Expand sales tax base to some additional services Pursue collection of online sales through “click-

through”/affiliate programs Target any tax relief towards those in greatest need:

Increase the personal exemption Stretch and index tax brackets Expand the grocery tax credit or earned income tax

credit Adopt “pay-go” requirement for tax cuts and new spending

A Fiscally Responsible CourseLimit Tax Credit Programs

Tax credits should adhere to the following standards: Formal eligibility process for businesses applying for

credits Clear performance standards regarding investment

and/or job creation, with consequences for failing to meet targets

Full disclosure of how credits are allocated Sunset provisions, with reauthorization tied to a

performance review Limit state liability through caps on amounts that can

be claimed – subject to annual legislative authority Gross production tax credits should be limited or

eliminated


A Fiscally Responsible CourseLimit Itemized Income Tax Deductions

Itemized deductions mostly benefit upper-income households

Several options could be considered: Repeal itemized deductions while increasing the

standard deduction available to all families, OR Cap the total value of itemized deductions, OR Convert deductions to a credit as a set amount of

selected federal deductions, OR Do away with the deduction for state income tax

payments Could generate $100 million to $115 million in new

revenue Additional state tax liability would be partly offset by

reduced federal tax liability


A Fiscally Responsible CourseModernize the Sales Tax

Expand the sales tax base to cover selected services Oklahoma currently taxes only 32 of 168 potentially

taxable services Taxing services is needed to maintain the long-term

adequacy of the sales tax and make the sales tax more economically fair and rational

Should be careful to exclude services consumed primarily by businesses to avoid pyramiding

Do away with sales tax exemptions benefitting favored industries

Pursue collection of online sales through “click-through”/affiliate programs

Combine these measures with ending the sales tax on groceries


A Fiscally Responsible CourseProvide Broad-Based Income Tax Cuts

If tax cuts are on the table, increasing the personal exemption and stretching income tax brackets would assist more households and distribute benefits more broadly than further cuts to the top rate

Personal exemption has remained unchanged at $1,000 per person since 1982

Failure for decades to index income tax brackets: Seven brackets all narrowly squeezed together Bracket creep –56 percent of taxpayers now reach

the top bracket; a much greater share of income is taxed at the highest level


A Fiscally Responsible CourseAdopt Pay-Go Requirement

Ensure that fiscal balance is maintained by requiring that tax cuts be fully offset with:

New revenues Elimination of tax breaks Identified spending cuts

New spending obligations would have to be paid for with additional revenues or cuts to other services

Current services budget and long-term budget forecasting would also help policymakers make sustainable budget choices


A Fiscally Responsible Course Make smarter expenditure decisions:

Consolidate duplicative agencies and streamline services

Prioritize prevention and surveillance Ensure adequate funding of public pensions

Give control for making decisions about revenues and spending back to our elected representatives


Looking Ahead

“The odds of our elected officials doing the right thing are zero unless YOU tell them what needs to be done.”

A hopeful note?

For More Information

Updated Budget Information okpolicy.org/current-budget-information

Tax Policy Information http://okpolicy.org/tax-reform-

information

Stay informed and get engaged http://okpolicy.org/take-action Join the “Together OK” group on

Facebook

Stay Connected E-mail [email protected] Visit our website www.okpolicy.org and blog

www.okpolicy.org/blog Subscribe to e-mail alerts at okpolicy.org Follow @okpolicy on Twitter Like Oklahoma Policy Institute on Facebook

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Please consider a tax-deductible contribution to support our work. We are a 501(c)(3) funded by grants and contributions from individuals, organizations and businesses. You can donate at okpolicy.org or send a check to:

Oklahoma Policy InstituteP.O. Box 14347

Tulsa, OK 74159-1347

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Oklahoma’s Fiscal Outlook: Moving from Crisis to Stability July 2012

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