Oklahoma faces a $900 million overspending problem, and that number could reach as high as $1 billion with falling gas prices and lower tax collections in December. Gov. Mary Fallin’s solution is $910 million in “recurring revenue,” an evasive term for tax hikes.
In her state of the state address Monday, Feb. 1, Fallin, a Taxpayer Protection Pledge signer, proposed:
-$181.6 million from a $1.50-per-pack cigarette tax hike
-$200 million from reducing sales tax exemptions and expanding sales taxes.
Oklahoma’s cigarette tax is currently $1.03. Fallin argued that cigarettes lead to an annual $1.6 billion in health costs. Nearly every dollar Fallin anticipates receiving, as a result of the cigarette tax increase, will be plowed into teacher raises, constituting $178.4 million in higher annual spending. This isn’t about the impact of smoking on public health costs; it’s about extracting resources from those who can least afford it to fund an addiction to overspending.
Fallin emphasized that her plan does not raise the 8.77 percent sales tax, the sixth highest combined state and local rate in the U.S. But she does want to apply sales taxes to more items, insisting the state has too many outdated exemptions. She points to neighboring states as a model for implementing more sales taxes:
“This budget proposes eliminating outdated exemptions and looking at areas other states apply sales tax to that aren’t subject to sales tax in Oklahoma. The Texas sales tax covers roughly 60 more categories than Oklahoma’s. New Mexico’s sales tax covers 130 more categories than Oklahoma’s.”
Conservative tax reform includes both a broadening of the base for taxable goods and services AND a reduction in the rate, not simply an expansion of things taxed.
Fallin isn’t only consumed by the concept of extracting more money from Okalahoma taxpayers; she has called on Congress to implement a national online sales tax as well:
“We all know that cities and states are losing out on sales tax revenue each year as more business is conducted online, and states like Oklahoma can’t collect sales tax because of federal inaction. We all need to call on Congress to level the field for small businesses and Oklahoma retailers by implementing a fair system for online sales tax.”
Proposed legislation could do just that in the Sooner State. House Bill 2925 would allow the state to collect sales taxes from online retailers like Amazon.
Gov. Fallin’s proposal stands in stark contrast to recent accomplishments made in Okalahoma. Most notably, she pushed for income tax cuts, which into effect last month.
Defending the tax cuts in December, Fallin said:
“Tax policy is long-term policy and, over the long term, a lower tax burden is good policy and the policy the voters have asked for in Oklahoma. If Oklahoma wants to attract and retain good jobs — rather than losing them to neighboring states — we must improve our tax climate.”
Today Fallin’s outlook is a complete turnaround. Her new proposals — creating more sales taxes and raising the cigarette tax —would not improve the tax climate. The cigarette tax, currently the 30th-highest, would reach the top 10 if Fallin’s proposal went through.
Oklahoma does not have a revenue problem; it has a spending problem. Instead of straddling low-income consumers and families with higher taxes, the legislature should rein in spending instead.
Not only does her budget constitute a violation of the Taxpayer Protection Pledge, a vote in support of it by legislators would be a violation as well. ATR urges the legislature to reject this senseless cash-grab.