Gov. Kevin Stitt and the Republican legislative leaders deserve credit for cutting taxes earlier this year. This was a necessary and welcome economic measure that will allow Oklahoma residents to keep more of their hard-earned money.
However, there is an important difference between a low income tax and no income tax. Lower income tax rates are moving the economy in the right direction, but Oklahoma leaders looking for an effective way to advance our state’s economic recovery should make a simple shift in policy: eliminate income tax from the state of Oklahoma.
To take advantage of a strong economic recovery, we should not only reduce income tax rates, we should repeal state income tax altogether. This would put us on a better economic path, ensuring prosperity for future generations of Oklahoma.
Oklahoma is one of 42 states that impose income tax. To assess the transformative economic impact of repealing income tax, we need only look at the eight states that do not. Spoiler alert: They are overtaking the rest of us in terms of economic and population growth, and it’s not even close competition.
Take Tennessee, for example. For decades, the Tennessee income tax on investment income, dividends, and interest has served as a backbone of state and municipal coffers. Tax reformers have spent years trying to limit the impact of the tax, using much the same argument I am making today. Finally, in 2016, the Tennessee legislature approved and former Gov. Bill Haslam signed a phase-out plan that was completed last year.
What happened in Tennessee in the meantime? In 2018, Amazon decided to establish a major operations and logistics center in Nashville. Asset manager AllianceBernstein has also moved its headquarters from Manhattan to Nashville. In 2019, Mitsubishi Motors North America announced that it would be moving its headquarters from California to Franklin.
In May this year, software giant Oracle announced plans to build a 65-acre campus in Nashville for 8,500 workers, just after its decision to move its headquarters from Silicon Valley to Austin. By the way, Texas doesn’t have income tax either.
Amazon, AllianceBernstein, Mitsubishi and Oracle are representative of a growing number of companies moving their operations from states subject to income tax to those that do not. A survey by the national consulting firm West Monroe found that 29% of senior executives said they were considering moving major operations or headquarters to another state or country, with the tax burden of their current location being l ‘one of the two main factors.
However, it’s not just big companies and CEOs that are moving. In 2017, Tennessee led the country in terms of employment growth among small businesses, according to a Paychex poll.
Workers and retirees move to states without income tax, and they take their wealth with them. An analysis of this data by research firm Wirepoints found that in 2019, Florida earned $ 17.7 billion in adjusted gross income (AGI). Florida’s $ 3.4 billion gain was due to migration from New York and $ 1.2 billion from California, both high-tax states. Tennessee was among the AGI’s biggest winners, adding $ 1.9 billion in revenue. For comparison, Oklahoma lost $ 28 million in AGI in 2019.
“Florida, Nevada and Tennessee have been able to keep their income tax zero in part thanks to strong population migration,” the Wall Street Journal reported with reference to Wirepoints’ analysis. “The result is that tax-free states get richer while those that impose taxes get poorer. “
In other words, people vote with their feet.
Oklahomans have a choice. We can pursue policies that stifle growth and impoverish future generations, or we can make bold decisions to make Oklahoma a more attractive place to relocate, keep our most talented Oklahomans here, and diversify our economy. State. We also need, of course, to ensure adequate funding for state government and provision of services to citizens, but the eight states that forgo income tax illustrate that the two are not mutually exclusive.
As a state, we came out of the pandemic one step ahead of other states that have kept their economies closed. It’s time to hit the gas and make sure we stay in pole position. It is time to eliminate income tax.
Bill Schonacher is the President and CEO of IBC Bank-Oklahoma.