While a sales tax is not an especially fair tax, it is really our only choice for improving school funding in Oklahoma. I know this makes the decision difficult. But please be aware that those who a promoting ads against SQ779 are the same ones that have no politically viable alternative for any other way of funding preK-16 education in our state.
Consider this. The only bill to address a teacher raise during the last legislative session was to give teachers a $5,000 raise and cap their insurance benefits. This bill died in committee. In fact, it was technically not introduced since it was a proposed alternate version to a shell bill. Senator Mazzei’s measure to rescind the last income tax cut went nowhere.
Given the realities of yearly increases in both cost of living and health insurance premiums, the move to cap insurance benefits (which I expect to return this session) was a red herring. This did not fool anyone. Even if the insurance premiums increased at the cost of living it would take no time for the combined rise in the consumer price index and insurance premiums to negate the raise. I guess teachers were not supposed to be smart enough to figure this out. Just as an aside, the insult was noted. This was not a teacher’s union issue. This was a “teachers figured out someone was trying to do them financial harm.” This is the kind of “help” we can expect from legislative leaders.
There are several reasons other methods of funding education are problematic.
Many legislators have signed a pledge not to increase taxes. Ever. While this pledge is not legally binding, many feel duty bound to honor it. The “no new taxes” philosophy is common in the state legislature. It is a safe bet there will be no-new-taxes-ever members of the 2017 state legislature to prevent the 75% majority needed to pass a tax increase.
Are there other viable alternatives?
Raising income taxes or rolling back income tax cuts seems almost like a foolhardy idea when the state legislature, supported by a well-heeled lobbying effort, seems hell bent on eliminating income taxes all together.
There is some momentum for ending or reducing tax credits, but so far the only tax credit reduced was the Earned Income Tax credit which harms the working poor. (I am still incredulous about this.) This elimination just makes it harder to escape from government support to earning your own way. (The same people who did this are howling about a regressive sales tax.) There is some effort to end wind energy tax credits. But the whole tax credit system, which allows businesses to actually sell the tax credits (!) is an invitation to corruption. This is, however, not news. Somehow nothing has been done. I’m not holding my breath.
Our state property tax system is in great disarray since many counties are taxed far below their evaluation. Our property tax revenue is indeed low compared to other states, but the system is also broken. Because of limits imposed on property tax increases, there is a limit to the amount of adjustments local assessors can make per year, even if current assessments do not follow legal requirements. There are too many that do not. Because of this limits and the realities of inflation, it is nearly mathematically impossible to get assessments caught ever if the maximum increase in assessed value was made on a yearly basis. Impossible means forever impossible without changes in the system. And so far there seems to be little effort to begin this process. (I hope I am wrong about that. But still…) Anything funded with property tax is going to have an unequal impact. It would be great for the legislature to address the problems with Ad Valorem taxes in our state. But I am not holding my breath.
As it is, then, we have decreased income taxes on the way to elimination.. Our property taxes are low and the system is in disarray. Those two major sources of tax revenue are problematic as state wide funding sources for education. Recent cuts and tax credits in gross production taxes combined with the drop in oil prices make these taxes an unlikely source of education funding as well.
The sales tax is indeed a poor source for education funding. It just happens to be the only possible solution given the political and economic situation we face currently in Oklahoma which I outlined above. Our schools are in crisis. This “we need to support schools but not with sales tax” statement sounds fine, but it totally ignores what we (and they) know to be true about both taxes and politics in our state. It is not a normal lie. It is a lie perpetrated by people intelligent enough to know better. Many that repeat are just believing what they have been told.Or they share my aversion to sales taxes but have not considered the alternatives. But the ones perpetrating the lie in ads and editorials know what they are doing. That group of people is not planning anything to actually fix the problem.
Lastly, we will not have the highest state sales tax in the USA if SQ779 passes. That would be California at 7.5%. (Ours is 4.5%) Four states have 7%. Tennessee, where Art Laffer lives because they do not tax tips and wages, is a 7% state. Our neighbor, Arkansas, has 6.5%. Why do we hear 10% given as the new figure? It is a little misleading because it will not be 10% in many cities and in unnicorporated areas. We pay more than our state rate of 4.5% at the register in most cases.. Because or our poor system of revenue support for municipalities, cities and towns have had to ask for sales tax increases to pay for operations and capital expenditures.. OKC is paying for parks. Tulsa is building dams in the river. There have been county sales tax increases as well. Taxes have been voted up locally while the legislature has been cutting in OKC. No one seems to notice this incongruity. Sources of revenue for municipalities should be addressed. But schools also rely on sales taxes and have for years. Despite the protestations of mayors all over the state, they do not have a monopoly on that revenue source.
The reality is that when one revenue source is low or non-existent another source will have to increase. When we have two major sources of revenue that are low or faling, (property and income tax) something else is goes up or basic services suffer. According to taxfoundation.org, our tax holiday is earlier than any of the surrounding states. We cannot survive by being the lowest taxed in ALL areas. It is a give and take. So far education, both preK–12 and higher ed, have been giving. Since the sun still comes up in the morning many politicians seem to think that all the tax cuts have harmed nothing. But we don’t have enough people to investigate child abuse, we underpay highway patrol officers and prison guards (and teachers), mental health care seems to be charities feeding people who live under bridges, our state credit rating is no longer AAA….. That is not a complete or prioritized list. SQ779 will help schools, but the entire state needs to be on a more sound financial footing. Even our method of estimating tax revenue is ranked 50 out of 50.
What is happening is a brain drain. We are losing talent to other states with better funded schools and universities. Not just teacher, but also students and others who want the best for their families. This has to stop. SQ779 is at least a step in the right direction. And it is an urgent need that should be addressed now, before long term damage is done to our state.
That was about the big lie. As the ads have come out more lies have surfaced. I reserve the right to add more lies and also exaggerations or technically truthful statements that are used in a misleading manner because the anti-SQ779 forces evidently think they cannot win with truthful arguments. So lets examine the ad from an advocacy group called Oklahoma Deserves Better. A lot of members appear to be mayors. If your mayor is involved they need to repudiate this ad. If they are going to oppose this bill they should at least be honest about their motives and see if that carries the day.
This is from the first eighteen seconds of the ad. One intentional mis-statement, one sort of true but not really statement and one prediction of economic impact that is unfounded.
“They call Tax Bill 779 an education tax. Actually, its a slush fund for administrators and less than half of the tax will pay teachers. Tax bill 779 will give Oklahoma the highest sales tax rate in America and that means less local shopping costing jobs and hurting city services like police and fire. “
Well. Lets take it in order.
1. “They call Tax Bill 779 an education tax.”
I don’t know who “they” are, but it is actually called State Question 779. If you call it SQ779 or State Question 779 then it is a true statement. There is no such thing as TB779 or Tax Bill779. The incorrect moniker is important because it is misleading. There is more to the question than taxes.
2. “Actually, its a slush fund for administrators…” More about this in the next section, but school administrators have budgets and expenditures are approved by school boards each month. There will be no slush fund.
3.. “and less than half of the tax will pay teachers.” This is just not true. It is malarkey, poppycock, bull hockey, false. A lie. Donors who helped fund this ad should ashamed and so should the OCPA. This seems to be an OCPA talking point based on the amount of money they say it will take to fund the raises multiplied by the number of teachers. The bill mandates 62% go to teachers but it doesn’t say that any overage can be used for any damn thing.. School districts are audited every year. There are different sources of revenue for public schools. Some of those sources, like building fund levies, almost all federal funds, and money from bond issues, are restricted in their use. The SQ779 funds are restricted. District administrators and school board members have gotten in big legal trouble for misappropriation of funds. The money will go where it is suppose to go.
4. “Tax bill 779 will give Oklahoma the highest sales tax rate in America..” This might be true if the state wide tax rate was the same all over the state. As it turns out it is very very close. There are some places in Oklahoma that will have a tax of 12% if SQ779 passes. Some unincorporated areas will only have 5.5%, which is the amount of the sales tax will go to the state. It is also hard to get accurate information. One web page claims there are places in California that have 11% sales tax. Baldwin County, Alabama has 10% (7% state and 3% local.) Louisiana’s average combined state and local sales tax is 9.99% according an article on accountingweb.com And indeed, to get to a 9.99% average, some cities in Alabama have rates higher than 10%. The top rate in Louisiana, according to sale-tax.com, is Montpelier, which has 11% after a recent increase. According to the same web page, the highest sales tax in Oklahoma is 11% as well. According to Tax-Rates.org Oklahoma’s current average sales tax rate is 8.8%. If 799 passes some localities will arguably have the highest sales tax in America. Oklahoma City and Tulsa would not be on that list. I have to admit that Oklahoma would have the highest average sales tax rate, beating Alabama by .0014%. That’s pretty close. We would get the title by a nose.
However, Oklahoma’s state sales tax is 4.5%. Even with the SQ799 increase we would still not have the highest state sales tax in the nation. We would come in around 19. So it is again a mixed question. What it does point out is that we need a better way to fund municipal government.
5. “….. and that means less local shopping costing jobs and hurting city services like police and fire. ” This is the goal of opponents of SQ779. The statement about high sales taxes provides a rationale for chicken little economic predictions. They bewail what could possibly happen to police officers and firefighters and ignore totally what has happened and what is happening to teachers.
There is no way to prove how this will effect economic growth. The funds from this bill could also stimulate all areas of the state economy since 60% is earmarked for teacher pay. Lower tuition, a slowing of increases, or full funding of Oklahoma’s promise would go along way towards stimulating the Oklahoma economy. Well-funded schools could draw people in to the state. A better educated citizenry, both k-12 and college, would help local business start ups. In states with high economic growth it is all about businesses starring locally that grow rather than paying businesses to come in.
In a state that has become increasingly dependent on sales tax revenue, it is hard to see the outrage over one more penny. Tulsa Mayor Dewey Bartlett complained on local radio about the burden to an impoverished family of paying $5.00 in taxes on a $50.00 grocery purchase. He was obviously using a 10% tax rate. (We will for now ignore the fact that Tulsa’s sales tax would be under 10% if SQ799 passes.) Using his 10% figure, the tax without SQ799 would be 9% and the tax on $50.00 worth of groceries would be $4.50. And, in rough numbers, about $2.00 belongs to the city and county. Mayor Bartlett had no trouble advocating for the evil regressive sales tax to pay for his vision program. Only on another penny for schools that are funded at nearly the lowest level in the US. Please forgive those of us who have come to believe that at least some of the opposition to this tax is, for at least some, opposition to public schools in general.
Taxes above the state minimum have been voted up in community after community. Will a higher tax have an effect on the economy? It has to have some. But whether one more penny will bring about the economic catastrophe predicted in the add is not known. What is known is that our brightest students are often leaving the state to pursue their college degrees. Our teachers are leaving for better jobs. Young families leave the state for better schools and never return. Stopping the brain drain would have to have a positive effect. And if the state wants to, they can cut the part of the sales tax that doesn’t go towards schools. They an make up the difference by getting rid of a lot of corporate tax credits.