Repeated cuts to the state income tax made since the mid-2000s are one of the most significant reasons for an ongoing financial crisis that is eroding important public services and threatening Oklahoma’s economic well-being.
Acute teacher shortages, college tuition and fee hikes, critically understaffed correctional facilities, longer waiting lists for services, and lower reimbursement rates for medical and social service providers are among the harmful consequences of chronic budget shortfalls.
Beginning with the Great Recession that reached Oklahoma in 2009, the state has experienced a continuing budget crisis. Even after the economy recovered from a severe national recession, Oklahoma’s funding for core services remains well below pre-recession levels. Many state agencies still operate with one-quarter to one-third less state support compared to fiscal year 2009. Overall, this year’s state appropriated budget is $896 million, or 11.4 percent, below that of 2009 once adjusted for inflation.
Numerous factors contribute to the growing gap between the cost of maintaining core services and the revenue Oklahoma collects to pay for them. These include erosion of the tax base through the growth of online commerce and the shift to a service-based economy, the ballooning number and cost of tax incentives, and an increasing share of tax dollars that are allocated off-the-top for specified purposes, leaving less revenue for general appropriations.2 While these other factors contribute to budget shortfalls, the series of cuts to the state income tax that have reached an annual cost of more than $1 billion in lost revenue cannot be overstated as a cause.
Michigan has a budget problem, and simply put, there just isn’t enough money to go around. Michigan has experienced crisis after crisis—the Great Recession, nearly record-high unemployment, municipal financial emergencies, the city of Detroit’s bankruptcy, the Flint water crisis and the financial struggles of Detroit Public Schools to name a few. In attempting to fix them, the state has relied on budget cuts, temporary Band-Aids or one-time pots of money. It hasn’t worked. Michigan’s disinvestment in its schools, infrastructure, communities and people needs to be reversed, and it cannot do so without more revenue.
Unfortunately, at the same time that the state needs more money, policy trends have continually pulled more out of our state budget. In recent history, we have spent more in state and local tax credits, deductions and exemptions each year than we do in total budget spending from state general and restricted funds—a difference of roughly $4 billion in 2015. On top of this, instead of increasing revenues to cover increasing costs, the Legislature shifts around our revenue streams, leaving potential shortfalls to be resolved with budget cuts. Lawmakers need to have a better idea of how much money we are failing to collect, review existing tax expenditures and earmarks to make sure they are still good policy, and provide accountability for new tax breaks and other policy changes.
Large tax reductions proposed at a time when Mississippi already is cutting important public investments due to a lack of revenue would erode the state’s ability to create jobs and have a competitive economy. Over the past two years, major tax cut proposals have been proposed that would cut and flatten the state’s income tax and cut corporate taxes, including the state’s corporate franchise tax. The proposed cuts would reduce general fund collections and limit revenue to fund schools, support public safety, protect public health and invest in the state’s road and bridge system. These tax cut proposals have come at an especially inopportune time because Mississippi’s state finances are already under severe pressure.
Allowing Coloradans to split their state income tax refunds among several accounts would enable families to save while meeting immediate needs. Coloradans could directly deposit part of their refunds in a 529 college savings account, helping increase the opportunities for students from low- to moderate-income families to attend and graduate from college.