Should sales taxes be paid by everyone? Most people probably think so. After all, if the answer is yes, the policy is pretty simple and transparent. If the answer is no, then politicians have a lot of power to pick winners and losers.

Unfortunately, generations of Oklahoma politicians have littered state law with sales tax exemptions (73 according to the Tax Commission). Many of these go to good people and sympathetic organizations doing important work. Some are harder to understand, like exemptions for cable television companies or “events relating to robotics.”

Government also exempts itself from sales taxes. This might seem harmless—after all, why make government pay taxes to itself? But this is perhaps the most perverse policy of all.

Steve Anderson, an OCPA fellow, has written about his work on the issue while he was budget director for the state of Kansas. He points out that applying sales taxes to government purchasing would help to “disincentivize government spending [and] level the playing field for Oklahoma businesses.”

When government pays no sales taxes, it distorts comparisons between the costs of private services-providers and government, as OCPA President Jonathan Small pointed out in a recent Journal Record column. It gives government an unfair advantage where it competes with private businesses or organizations.

In fact, the sales tax exemption works like a penalty for government contracting out services. Just like businesses often hire other businesses to provide things like office cleaning, security, or maintenance, government agencies can sometimes reduce costs or maintain greater flexibility by contracting for services. In Oklahoma, however, “purchases made by a contractor in fulfilling a State contract are taxable to the contractor.” This turns the sales tax exemption into a kind of penalty on those agencies that try to contract out for services.