Budget & Tax
J. Scott Moody & Wendy Warcholik, Ph.D. | February 1, 2009
How Many Oklahomans Does It Take to Fund One Government Job?
J. Scott Moody & Wendy Warcholik, Ph.D.
[Editor’s note: The data in this article have been superseded by the updated information here.]
It takes 16 Oklahomans in the private sector to fund one Oklahoma state government job.
In 2007 there were 83,709 state government workers in Oklahoma earning a total of $3,759,351,000-or an average of $44,910 per job. As a result, it would take a total of 1,339,344 private-sector jobs to fund Oklahoma's state bureaucracy-slightly more people than were employed in the private sector in 2007 (1,290,594).1
Oklahomans are paying dearly for these 83,709 state government employees in the form of higher taxes. As we pointed out in these pages in December, Oklahoma state government has 27,636 too many jobs when compared to the national state employment average.2 Eliminating these jobs would have saved Oklahoma's taxpayers up to $1,194,462,318 in 2007.
As for the local level, it takes 26 Oklahomans in the private sector to fund one local government job in the state.
In 2007 there were 191,734 local government workers in Oklahoma earning a total of $8,199,556,000-or an average of $42,765 per job. As a result, it would take a total of 4,985,084 private sector jobs to fund Oklahoma's local bureaucracy-or 3.9 times the people employed by Oklahoma's private sector in 2007.
As with the state government, Oklahomans are paying dearly for those 191,734 local government workers. Oklahoma's local governments have 38,448 too many jobs when compared to the national average. Eliminating these jobs would have saved Oklahoma's taxpayers up to $1,614,385,279 in 2007.
With 275,443 employees, "state and local government" is the largest industry classification (in terms of employment) in Oklahoma-larger than manufacturing (158,294), retail trade (223,136), health care and social assistance (199,617), and administrative and waste services (138,183).
1. This may appear nonsensical at first glance. However, keep in mind that this counts only taxes that are directly paid by individuals and does not include taxes paid by businesses, taxpayers with higher than average incomes, revenue from matching federal funds (such as Medicaid), or taxes paid by non-residents or retirees. In short, this exercise is meant to illustrate the simple concept that all money spent by government must first come from taxpayers and that government employees really are "servants of the people."
2. For more information on Oklahoma's compensation and employment ratios, see J. Scott Moody, Wendy Warcholik, and Brandon Dutcher, "Overcrowding on the Government Gravy Train," Perspective, December 2008, pp. 4-6.
The average private sector compensation per job was $42,051 in 2007. Compensation is broken down into wages and salaries ($34,953) and benefits ($7,098).
In order to calculate the amount of taxes paid, we utilized the information provided by Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, published by the Institute on Taxation and Economic Policy (ITEP), a liberal think tank based in Washington, D.C.
Although benefits are not taxable, our study assumes the full $34,953 in wages and salaries is taxable. ITEP uses a "family income" (FI) concept which is likely very similar to the "adjusted gross income" (AGI) concept used on federal and state individual income tax forms. In order to derive FI, wages and salaries were increased by 30 percent to approximate AGI (according to the Internal Revenue Service, wages and salaries constitute about 70 percent of AGI). The resulting average FI was $45,440 per job in 2007.
The ITEP analysis shows that the effective tax rate for a taxpayer earning $45,440 is 10 percent-split 6.3 percent for state taxes and 3.7 percent for local taxes. While the ITEP report was released in January 2003, data from the Census Bureau indicate that no major changes in the overall effective tax rate in Oklahoma have occurred. As such, the ITEP estimate is still useful for this application. Overall, the average private sector job paid $2,854 in direct state taxes and $1,672 in direct local taxes in 2007.
Dividing the average state government compensation per job ($44,910) by $2,854 yields 16 average private sector jobs needed to sustain a single state government job in 2007. Dividing the average local government compensation per job ($42,765) by $1,672 yields 26 average private sector jobs needed to sustain a single local government job in 2007.
J. Scott Moody (M.A., George Mason University) and Wendy P. Warcholik (Ph.D., George Mason University) are OCPA research fellows.
J. Scott Moody
OCPA Research Fellow
OCPA research fellow J. Scott Moody (M.A., George Mason University) serves as chief executive officer of State Budget Solutions. Formerly a senior economist at the Tax Foundation and a senior economist at the Heritage Foundation, he has twice testified before the Ways and Means Committee of the U.S. House of Representatives. Moody is the co-creator of the Tax Foundation’s popular “State Business Tax Climate Index.” His work has appeared in Forbes, CNN Money, State Tax Notes, The Oklahoman, and several other publications. This article is an updated version of an analysis published in 2008.
Wendy Warcholik, Ph.D.
OCPA Research Fellow
Wendy P. Warcholik (Ph.D., George Mason University) is an OCPA research fellow. She formerly served as an economist at the U.S. Department of Commerce’s Bureau of Economic Analysis, and was the chief forecasting economist for the Commonwealth of Virginia’s Department of Medical Assistance Services. She is a co-creator (with J. Scott Moody) of the Tax Foundation’s popular “State Business Tax Climate Index.”