By Jason Murphey

Oklahoma state government spends nearly 17 billion dollars each year. This does not include the money spent by public authorities (eg. the Turnpike Authority) or pension funds, which expend billions more.

The state income tax generates about $2 billion, or just over ten percent of this amount. So if state government could downsize expenditures by just 10%, the entire tax could be eliminated.

One of the primary motivational factors for my work to reduce government spending has been to deliver on the platform that I campaigned. I campaigned on getting rid of this tax. I don't want to be someone who runs for office on big promises and then fails to deliver. I am committed to working as hard as possible to reduce the obviously unnecessary and inefficient spending so that this and other taxes can be eliminated and reduced.

The effort to eliminate the tax was greatly enhanced by the recent release of a report from President Regan's economic advisor Arthur Laffer (known as the father of supply-side economics) and the Oklahoma Council of Public Affairs. The OCPA report thrust this issue into the forefront of the legislative discussions of tax reform, and several legislators will file legislation this year to implement the plan and eliminate the tax.

The plan details how to eliminate the state income tax over the next ten years without increasing other taxes. The tax would be immediately converted into a 3% flat tax with ¼% reductions each year until the tax is completely gone.

Perhaps the most exciting component of the report is its description of the economic transformation that would occur in Oklahoma as a result of this action.

The report details how the elimination would increase the incentive for individuals to work, produce and save in Oklahoma. This would allow for increased spending that would result in more sales tax revenue, providing $3.5 billion to local governments and offsetting part of the lost income to state government. Personal income would increase by $47.4 billion. Some of those who would otherwise qualify for and use state and federal benefits such as food stamps, medicaid and TANF will not need to do so. This would relieve part of the tremendous pressure on the state's social service.

With the resulting increase of job opportunities, the migration of Oklahoma college graduates to the high performing states (including states like Texas and Florida who have no income tax) should subside. This would allow future generations to stay here and remain with their families.

When this new growth revenue is combined with the cost avoidance and the legislature's ongoing cost cutting efforts and modernization reforms, I am convinced the overall impact of eliminating the state income tax will be minimal and there would be no need to increase other taxes.

This point is especially important. I have found that the number one reason some fear the elimination of the income tax is due to their even stronger dislike of the property tax. Senior citizens especially dislike the property tax because it threatens to force them out of the home they have worked all their lives to pay off.

This fear can usually be traced to the fact that Texas has high property tax rates. Whenever someone mentions the fact that Texas has no state income tax, the comment is invariably followed by someone else describing Texas' less-than-friendly property tax policy.

I have always been a big believer in omnibus property tax reform. In the past, I have written about how this could be accomplished through the implementation of parental choice and education reform.

I also believe that another component of property tax reform and reducing property tax rates can be accomplished by eliminating the state income tax.

In Oklahoma, state government does not have a statewide property tax. The property tax is collected at the county level where it is mostly distributed to schools and career techs, with a small percent going to county government. Local governments also sometimes use the property tax to fund the creation of real property capital assets such as new buildings.

So how does the elimination of the income tax assist with property tax reform?

According to the OCPA study, the elimination of the state income tax would result in significant amounts increased economic activity. This activity would increase the income of Oklahomans by nearly 50 billion dollars. When this money is spent, sales tax collections would increase local government revenue by 3.5 billion dollars. With the increased sales tax collections, fewer local governments would need to ask for property tax increases to build their real property assets.

In fact, it may be possible for policy makers to capture some of this increased revenue by creating a property tax rebate fund and channeling some of the new growth income into the fund. The fund could be used to rebate property tax income to counties and schools as a result of new decreased property tax rates.

A rising tide lifts all boats. When the government has the courage to use tax reform to allow its citizens to keep their money, that money will be used to provide jobs and economic activity. This expands the tax base and makes even more tax reform possible.

Eliminating the income tax should be viewed as an important step in the effort to reduce property tax rates.