Leading Okla. economists criticize tax cut plan

Leading Okla. economists criticize plan to phase out income tax, warn of dire consequences

Associated Press

OKLAHOMA CITY (AP) -- Several of Oklahoma's leading economists on Thursday criticized a plan to phase out the state's personal income tax and urged lawmakers to exercise caution as they consider reducing the tax rate.

Economists from the University of Oklahoma and Oklahoma State University were among several speakers at a panel discussion entitled: "Eliminating the Income Tax: Silver Bullet or Fools' Gold."

The economists were particularly critical of the so-called Laffer plan, named after conservative economist Art Laffer, which would immediately slash the state's top rate of 5.25 percent by 2.25 percent and then completely eliminate the state's income tax over the next decade. That proposal is one of several measures being considered in the GOP-controlled Legislature this year.

"It's a poorly conceived plan that's based on a false premise of economic growth and development," said Alexander Holmes, regents professor of economics emeritus at the University of Oklahoma and a one-time state budget director under former Republican Gov. Henry Bellmon in the 1980s. "The people who actually do economic growth and development for a living have stated unequivocally that personal income tax is not a mechanism that will spur economic growth."

Holmes also cautioned that once the income tax is cut, it would be virtually impossible to put back in place during a fiscal crisis because of a constitutional requirement that any tax be approved by a super-majority of the Legislature or a vote of the people.

"The scariest part of this is if it doesn't work, you can't fix it," Holmes said. "That's what keeps me up at night."

But officials with the Oklahoma Council of Public Affairs, a think-tank pushing the Laffer plan, maintain that Oklahoma already has seen economic growth at least in part due to income tax cuts that have been accomplished over the last decade. Studies they've conducted show Oklahoma's income and sales taxes actually grew following tax cuts to the personal income tax that began in 2005.

They urged lawmakers not to ease up on their plan to further cut and eliminate the income tax despite growing resistance from several groups that oppose eliminating various exemptions or deductions that would be needed to offset the revenue lost from cutting the income tax.

"Now is not the time to settle for a minor reduction," said OCPA Vice President Brian Bush. "Now is the time to double the powder and shorten the fuse."

GOP supporters of the plans to reduce and eliminate the state income tax say it will help lure business and industry to the state, but officials with the Oklahoma City and Tulsa chambers of commerce who participated in the panel discussion said a state's tax climate is only a minor part of attracting jobs.

Access to markets, natural resources and a quality workforce are far more important, said Roy Williams, president and CEO of the Greater Oklahoma City Chamber of Commerce.

"They want good infrastructure, good education facilities," Williams said. "To recruit talent in, it has to be a place people want to live."

The OCPA hosted a separate event Thursday recognizing "Tax Freedom Day" on Sunday in Oklahoma. It's the theoretical day of the year when the average worker has earned enough income to pay his entire federal, state and local tax burden.

Steve Anderson, the budget director for Kansas Republican Gov. Sam Brownback, said he's confident lawmakers in that state will approve a plan this year to slash the top income tax rate from 6.45 percent to 4.99 percent.

"It's not just about cutting the income tax," Anderson said. "What the governor said to me is that it's about pulling it up by the roots. Because then it won't regrow."

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Sean Murphy can be reached at www.twitter.com/apseanmurphy

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