Penny Hike Would Make Oklahoma King in Sales Taxes

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A proposed penny sales tax increase for education would push Oklahoma to the top of list of states with the highest combined state and local sales taxes, according to data from a national research group.

It also would elevate Tulsa and Oklahoma City to No. 3 and No. 4, respectively, among major cities with the highest combined sales taxes, trailing only Chicago and Seattle, the Tax Foundation said.

Oklahoma Tax Commission data compiled by Oklahoma Watch show that many cities and towns already have comparatively high sales tax burdens, with several dozen of them levying a dime or more at the checkout stand and five already ringing up 11 cents on the dollar (part of Clinton, in Washita County; Hallett; Kiowa; Red Rock, and Savanna.)

That might not be a problem, said Tax Foundation Policy Analyst Jared Walczak.

“It’s not necessarily bad to have a higher-than-average sales tax if you’re using that to have lower taxes in other areas,” Walczak said. “To some degree, that’s what Oklahoma does.”

Walczak said Oklahoma has much lower-than-average property taxes, and its individual and corporate income tax rates are close to the national average, in terms of their contribution to the cost of state, county and local government.

The Tax Foundation is a nonpartisan, nonprofit research organization based in Washington, D.C.

Oklahoma’s sales tax is under scrutiny because University of Oklahoma President David Boren has launched an initiative petition campaign to put a penny sales tax increase on the statewide ballot in November 2016.

If Boren’s proposed tax increase were approved by voters, the state sales tax would increase from the current 4.5-cent rate to 5.5 cents.

Counties, cities and towns impose additional sales tax levies on top of the state rate, ranging as high as 10.5 cents in Clinton, Fort Gibson, Kiowa, Red Rock and Savanna, Tax Commission data show.

The Boren plan would raise an estimated $615 million in additional funds for K-12 and higher education. About 60 percent is earmarked for common education, and most of it would be used to give Oklahoma schoolteachers a $5,000-a-year raise.

(The state Office of Management and Enterprise Services projects the tax would raise less, about $570 million, because of declining sales tax revenue. That would still be enough to pay for the salary increase, said Amber England, of Stand for Children Oklahoma, which was involved in writing the petition.)

In a recent interview with Oklahoma Watch, Boren said he would have preferred to finance his initiative with something other than a sales tax increase, but opinion polling suggested that a sales tax hike had the best chance of passage.

“I’m not a fan of the sales tax – everybody knows that. But I’m desperately in favor of this measure,” said Boren, a Democrat and former governor and U.S. senator.

“The education crisis is so dire … It’s a pragmatic solution, but it’s the only solution we could find,” Boren said.

High sales taxes are opposed by some economists and public officials because they are considered regressive. That means they tend to have a disproportionately large impact on the poor, who spend a bigger portion of their income at the grocery store and other retail establishments.

Some advocates of Boren’s proposal argue that any improvement in education is inherently progressive, regardless of the funding source. That’s because improving education gives future generations a better shot at contributing to Oklahoma’s economic growth, they say.

The Tax Foundation’s research shows that Oklahoma currently has a 8.78 percent combined state and local sales tax rate, ranking it No. 6 nationally. If Oklahoma voters approved a penny increase, Oklahoma would have 9.78 percent rate, higher than any other state. (Tennessee, which has no individual income tax, is now No. 1 at 9.46 percent.)

In a separate Tax Foundation ranking of the nation’s 50 most populous cities, Tulsa ranks 12th with a combined state, county and local sales tax rate of 8.52 percent. Oklahoma City ranks 14th at 8.38 percent.

If voters approved a penny sales tax increase, Tulsa would rank third and Oklahoma City fourth. Chicago currently has the nation’s highest big-city sales tax, at 10.25 percent, followed by Seattle at 9.6 percent.

Besides the Boren tax proposal, Oklahoma County also faces the possibility of a half-penny sales tax increase advocated by local officials who are trying to raise funds to improve the county jail and other local infrastructure.

Walczak said some states have managed to have competitive tax structures featuring higher-than-average sales taxes combined with low or no income taxes.

But he warned that Oklahoma might be nearing the limit of what taxpayers will find tolerable when they go to buy groceries, clothes and other sales-taxed items.

“There does seem to be a psychological cutoff point somewhere around the 10 percent range,” he said.

  • Gene Naukam

    With one billion from all sources now and no quality results being seen. How is this going to help the problem? Career Tech is now well funded as we never hear that group asking for money. Higher Education increase of tuition has been nonstop since the state legislative body took themselves out of approving tuition increase in Higher Education. When is cost control going to set in by Higher Education. We have not made Higher Education accountable in their budgets to the people by giving control to the board of regents, which has a high number of former elected officials involved. Is this a payback for taking control away form the people or at least the legislative body?

    • Justin

      A few things:
      -This tax increase would be for common education not for higher education.
      -Higher Education gets more than one billion in appropriations direct appropriations, before they even start charging tuition and interest. Actually that one billion doesn’t go very far and at some universities less than 15% of the cost per student is paid by state appropriations.
      -While there are several sources of the increases in tuition cost (like ballooning administration and technology cost) among the principle reasons is that direct State support has not come even close to keeping up with inflation.

      Meanwhile, this article is talking about a tax to fund salary increase for common education teachers.

      • Oklahoma Watch

        Justin, fyi: The penny sales tax would include funding for higher education. Of an estimated $615 million in revenue from the tax, about $370 million woud pay for a $5,000 a year teacher pay hike; $60 million for common-education efforts such as improving reading and high school grad rates; $120 million to higher ed to keep down the cost of tuition and fees; $50 million for early childhood; $20 million for CareerTech. Supporters of tax say no money would go toward administration.

  • Julia

    I certainly understand OU President Boren’s frustration with the lack of funding in this state for education, as well as other basic needs of our citizens. Most of us share his frustration with this legislature and governor.
    Education has been cut over 20% by these people while the number of students continues to increase. The only concern that this Republican group has expressed through their decisions is that their well-heeled corporate and individual allies will continue to see cuts in the amount of taxes they pay.
    The fact that the weight of our very high sales tax rate would be felt by the people in the low and middle income range is obviously not their concern. The legislature and governor need to reverse the cuts for the rich and take care of their responsibilities to the rest of us.

    We don’t need to add to our already too high sales tax. We need responsible governing.
    Hopefully, next November the people who make up the majority of Oklahomans will let them know how we feel about their actions.

    • Justin

      The only solution is to go vote. Last year, we set a record low partition rate in our election with only 29% of eligible Oklahomans bothering to show up. People perceive us as a single party state, but the real margins aren’t very big in our elections. Mary Fallin beat a relatively unheard of candidate in Joe Dorman by only 120,000 votes.

      If we want the tax cut madness eroding the core functions of our government to stop, we have to convince people to vote.

    • Amen

    • KARL

      you are right Julia
      from Oklahoma Watch 10-19-2015
      “ITEP did an analysis of Oklahoma’s tax system showing that an average low-income family spends about 10 percent of its budget on state and local taxes, compared with about 4 percent for high-income families.”

  • Donna

    Where have the Oklahoma lottery funds gone? We were told revenues generated by the lottery would go to our schools but I haven’t heard anyone talking about it.

    • Oklahoma Watch

      Donna: The Oklahoma Policy Institute, a research and advocacy group, recently published an analysis on where the lottery funds for education have gone. You can find it here:
      http://okpolicy.org/oklahoma-lotterys-contribution-to-education-reaches-new-low

    • Tim

      Oklahoma Lottery funds, try going back to Horse Racing that was going to fix education funding. I really do not feel more money is either.

  • Valerie Beusoleil

    I abhor this penny tax idea and Boren is an “old school” tax and spend democrat. Stop spending money we don’t have! Cut administrative costs in school budgets. You have been advised of this for YEARS!!!! Consolidate this crummy little country town schools that can’t properly educate the students but can afford to pay all these unnecessary superintendents etc….. I was educated in Iowa and am appalled at the backwardness of this state’s education system. Consolidate and get rid of the top heavy administrative costs just to start with. Come on into the 21st century…no more taxes until powers that be get wise. wasting more money on decrepit system is foolish. Where are the leaders with wisdom? Why should hard working citizens continue to plough money into lost direction and stagnation in our schools? Get wisdom. No more taxes!!

    • Michael

      Valerie, I am a teacher. Come spend a week with me. Spend a week following my principal and superintendent. I’m not saying there aren’t a few bad apples…but deal with those bad apples rather than strangling the entire system. The cure that they are trying is worse than the disease itself.

  • Bonnie Singer

    I won’t be voting for this tax. Increasing the sales tax means that the most needy are paying a much higher rate of their income than the more money fortunate. Corporate and property taxes are more appropriate avenues to pursue. How much more can you put on the backs of those who are already struggling to survive. I am sure Mr Boren is well aware of how this will affect the poor. I can only draw from this that he does not have the best interest of most Oklahomans in mind.

  • Bruthokla

    Good grief, even a university prez can’t figure out how to cut budgets, fire incompetent employees, reduce administrative bloat and re-direct money to its proper target: competent, well-trained, dedicated and effective classroom teachers in this case –WITHOUT raising taxes on OK’s small businesses and citizens! Why is it Leftists never understand simple concepts but instead go for the worst options? At this rate, OU will soon be defunct…oh, WAIT! It gets government money!! Oh, yeah! Of COURSE! That big genie that magically rains down money on whatever Leftists want will rescue the education system and give more to the university, too! (Yes, it will, Justin) MAGIC! The only thing to do is to convince the taxpayers and voters it’s ONLY a penny increase, not REALLY a 22% tax increase! That’s EASY to slip through while they are busy not paying attention! Meanwhile, Oklahoma’s education system goes the way of Detroit, Oklahoma’s small businesses struggle more than they already are, citizens are bilked out of more of their paychecks and too many six-figure salaries are STILL paid to administrators while incompetent teachers continue in jobs they shouldn’t and good dedicated teachers aren’t paid what they are worth. Aren’t we sick and tired of failed Leftist entitlement policies?

    • Michael

      I’m sick and tired of this bad teacher bad administrator education bloated argument. Come spend the week with me and the trenches and see what Oklahoma education is really like before you start making grand pronouncement that you know nothing about.

      • We know all you do is beg for more money

  • Jim McGoodwin

    Instead of a one cent sales tax increase, why not propose the creation of one or two new tax brackets. The first one would start at an income of $100,000 or more and would tax the amount above that amount at 6% and another bracket at $1 million and tax any amount earned above that at 7.5%. That would raise revenue and place the weight on those who are better able to afford it.

  • Jim McGoodwin’s idea sounds like a better idea. We need to stop lowering income taxes. A percentage of the personal income taxes goes to education and retired educators. Change control in November 2016.

  • B.W. Sanders

    Here is the list of “fixes” for education sold to the unsuspecting public in the last 25 years. Remember HB 1017..fix education forever (failed). Then liquor by the drink would save the children (failed). Then horse racing (along with the liquor by the drink) would do the trick by bringing in new industry (didn’t work)…. and then casino style gambling, which, by the way is the only thing keeping the horse tracks open. Then the lottery was going to fix it all. Not an impressive record of fixes. Last I heard, there are still around 600 school districts in the state with some of the 300-500 student (or less) schools with K thru 8th grades, most with a Superintendent who sometimes makes near six figures, then a highly paid Principal and their staff members. Until someone gets serious about the unpopular issue of consolidation, I won’t support this tax. Boren, like all the others in the past is trying to get this done on the backs of the classroom teacher, who always get screwed. The money never makes it to them.

    • John

      B W Sanders hit the nail on the head. I lived in Midwest City when 1017 passed. The first thing I noticed was the new admin building that was started before the bill passed. When the lottery passed, the state decreased funding for schools instead of using the additional funding to make schools better. Every time school funding is brought up, it is always said the teachers would get an increase in pay. The higher regents always get pay raises but not the teachers that do the most beneficial work. If the regents would cut their pay 10 % that may be enough to give the teachers the raises they deserve. Just remember, not all of this penny sales tax goes to teachers and I would bet that there will be provisions to redirect funding away from teachers. I will not be voting for for this tax increase.

  • Chris H

    I would like to weigh in on this since my wife is a teacher fresh out of college.

    The starting salaries are incredibly low in comparison to neighboring states. I have strongly considered getting a job in another state with higher teacher salaries. In case you are not aware, there is a huge teacher shortage in Oklahoma. There will continue to be a teacher shortage until Oklahoma wants to pay their teachers competitively.

    If this doesn’t pass, we may be moving where teachers are valued and respected. Oklahoma is ranked 49th out of 50 in the nation.

  • Hannah Blector

    Just like when they raised the tax in my town another penny, I will shift my spending elsewhere so as not to give more money to the people who cannot control their spending and don’t go without while the rest of us go without while paying them. Oklahoma will get a net loss due to this from me because I will either spend less or spend across the border.

  • Hannah Blector

    Why not have the corporations who got tax breaks pay the teachers?