Despite rising income inequality in the U.S. — a growing gap spotlighted by last year’s presidential campaign and the Occupy Wall Street movement — some Oklahoma leaders have wanted to make the state’s already-regressive tax code even more so.
Although the top 5 percent of the state’s earners paid 5 percent of their income in taxes compared to the bottom fifth’s 10 percent, three prominent plans for tax reform taken up by state legislators in 2012 proposed reducing the top tax rate and axing credits for working families.
Haves and have-nots
None passed, and most of the credits appear to be safe this legislative session, despite a Senate proposal to limit eligibility for the Child Tax Credit and Child Care Tax Credit.
“Compared to where we were a year ago, there seems to have been a recognition of the importance of these broad-based credits that benefit low- and moderate-income families,” said David Blatt, director of the Oklahoma Policy Institute, a
left-leaning think tank aimed at informing better policy by providing
better data. “There has been a real effort among leadership to keep
those off the table.”
But
other formidable challenges remain. According to a 2012 report by the
Center on Budget and Policy Priorities, the Sooner State accounts for
some of the last decade’s greatest chasms between the upper and the
middle classes.
Since
the 1970s, the wealthiest fifth of Oklahoma’s households saw their
incomes rise nearly 64 percent, whereas the middle fifth rose only 16
percent and the poorest fifth gained 5.3 percent.
In
more recent years, lower incomes have actually fallen. Between 1998 and
2007, the top fifth gained a more modest 7.7 percent, but the middle fifth stagnated and the bottom fifth lost 7.5 percent of their income.
The state’s pie has continued to grow, but one slice accounts for the lion’s share.
Tax
credits are one key to reducing the burden on low-income families. In
its 2013 Assets & Opportunity Scorecard, a state-by-state index of
Americans’ financial security, the nonprofit Corporation for Enterprise
and Development recommended that Oklahoma actually expand the Earned
Income Tax Credit to help struggling residents maximize their incomes
and build assets.
Widening gulf
Some
conservative voices have argued that the income gap isn’t necessarily a
problem. Last December, the State Chamber of Oklahoma hosted a guest
from the Heritage Foundation whose keynote speech was titled “Defending
the Dream: Why Income Inequality Doesn’t Threaten Opportunity.”
Likewise, an editorial in The Oklahoman last
November posited that “perhaps the gap is widening because some people
are working harder and succeeding out of proportion to other people.”
Blatt
agrees that income inequality isn’t a problem — at least not for
everyone. “It’s not a problem for those in the upper income brackets,”
he said. “It’s more for those who are seeing their share diminish.”
However,
he points out that as the number rises of those struggling to get by,
so does pressure on public and private safety nets. Other strains
associated with pronounced income inequality — such as higher rates of
crime, incarceration, teen childbirth and even stymied economic growth —
indicate that broad-based prosperity is a boon to society as a whole.
“We
and others in the faith community and food-security advocates are
engaged in an ongoing and likely permanent campaign to educate policymakers on the circumstances of lower-income families,” said Blatt.
And tax credits remain vulnerable.
State
Rep. Earl Sears, R-Bartlesville, is a co-sponsor of Senate Bill 323,
which seeks to reduce or eliminate 33 tax credits ranging from the arts
to hepatitis vaccinations.
One of them, the Sales Tax Relief Credit, provides low-income residents a $40 rebate to offset the tax paid on groceries.
“The
purpose of tax credits is to incentivize economic development,” Sears
said. “It is time for a thorough review of all of them to make sure
we’re still getting our bang for our buck.”
But Blatt sees signs for optimism.
He
said several measures this session that threatened the safety net
either have stalled or were heavily amended. Only a few bills are still
alive that his group identified as being unfair to poor citizens.
Among
them is legislation championed by House Speaker T.W. Shannon, R-Lawton,
which creates a public service announcement campaign promoting
marriage. House Bill 1908 would be funded by dollars from Temporary
Assistance for Needy Families.
“There’s
no research that shows running PSAs that promote marriage can have any
effect on anybody,”Blatt said. “However, if the bill passes, will
anybody get hurt? Chances are no, but there’s money that could be spent
more productively.”
No Medicaid Expansion
Last
year, Gov. Mary Fallin rejected federal aid totaling $3.6 billion over
seven years to extend Medicaid under the Affordable Care Act to some
693,000 qualifying Oklahomans.
Mickey
Hepner, dean of the University of Central Oklahoma’s College of
Business, calls that move “an incredible mistake” from both an
anti-poverty and economic development perspective.
“This
expansion would have helped provide greater access to quality health
care for Oklahoma’s working poor ... the group most likely to be unable
to pay when they get sick. These uncompensated costs are passed on to
taxpayers,” he said. “We will pay in other ways.”
