Why local governments should favor Oklahoma income-tax phaseout

January 25, 2012

In a recent column published in The Lawton Constitution (“Phaseout would create an economic boom,” January 24), I suggested that “Oklahoma should phase out its personal income tax and replace it with nothing. No property tax increases. No sales tax increases. Nothing.”

I gave three reasons why, perhaps the most important of which is that “phasing out the income tax would create an economic boom in Oklahoma, a boom in which Lawton and other local communities would participate.”

A new study, “Eliminating the State Income Tax in Oklahoma: An Economic Assessment,” estimates that by phasing out the income tax over a 10-year period, Oklahoma could expect a significant increase in state GDP growth, personal income growth, and employment growth. For example, by 2022 the income-tax phaseout would create 312,000 more jobs in Oklahoma than would have been created otherwise.

Moreover, “stronger economic growth would also increase revenues for local governments across Oklahoma,” the study says. “And, because there is no static tax reduction, every dollar of increased revenue created by Oklahoma’s stronger economy would increase the expenditure power of the local governments. Based on the economic growth estimated above and assuming local government revenues’ share of personal income remains constant, in aggregate, revenues for local governments would increase by $100 million in 2013, rising to an increase of $3.5 billion by 2022” (see nearby chart).