Saturday, January 09, 2010
TAX CUTS AND BUDGET SHORTFALLS
Week after week and month after month of this fiscal year, the Oklahoma media outlets have been filled with the news of revenue shortfalls and cuts in agency budgets. These reports have been followed by stories of the crisis in state services as a result of these budget shortfalls.
Schools and colleges have been faced with first 5% cuts in state funding and now with 10% cuts. Other state agencies and services such as corrections, mental health, social services for children, public safety, Medicaid, and even nutrition programs for the elderly have all made similar cuts. Some have furloughed employees; others have simply reduced services to clients in need.
The republican leader of the Oklahoma State Senate says that he looks upon this calamity as an “opportunity” to clean up state operations and bring more efficiency to state government. Heavenly Days! This is like the captain standing on the deck of the sinking ship, while crew and passengers slide into the water, and shouting, “Take courage, me hearties, we will be better off for all this!”
It is interesting how our media and politicians seem to blame only the economic downturn for our state revenue crisis. No one puts two and two together, it seems. There are bothersome inconsistencies in publicized reports of state economic data which should alert any thoughtful analyst.
As of now, Oklahoma is reported to have the worst revenue shortfall, relative to size, of any state in the country. Yet our economy has been reported to be one of the least affected by the recession.
Does anyone remember all those reports which said that the Oklahoma economy has not been nearly as badly damaged by the recession as the economies of other states? Has anyone looked at reported unemployment statistics in Oklahoma compared to other states? Has anyone noticed that our unemployment rate is one of the lower ones?
Has anyone wondered how Oklahoma’s economy can look relatively good compared with other states, have lower unemployment rates, and yet have the worst revenue shortfall problem in the country? Look no further. The answer is really not all that difficult.
Our current revenue shortfall is something around $900 million to a billion. Tax cuts by the Oklahoma legislature from 2004 through 2006 amounted to a total annual reduction in revenue of about $845 million. In 2008 some further tax breaks were given.
It is easy to see that Oklahoma would not be suffering such severe budget cuts today if the legislature had not been shortsighted and reckless with its earlier tax cuts. There would be a bit of a problem, but it would be a relatively minor one to handle. Retrenchment, if any, would be back to a higher base level.
So, let’s quit blaming the recession for everything, and start putting responsibility where it belongs – on the crowd-pleasing, fiscal foolishness of our own state legislature.
Another perplexing observation is how so many of our state political leaders, media, and citizens are so ready to criticize national spending in the recession stimulus package. They are ignoring the fact that those stimulus funds have already saved the State of Oklahoma from utter and complete disaster. Without federal stimulus funds we would already be nailing plywood on a lot of school house windows and public offices, shutting down roads and bridges, and turning convicts loose.
Why are we in Oklahoma so reluctant to give credit where it is due and place responsibility where it belongs?
Now, one would think that since those tax cuts have done the state’s finances so much harm, then surely they must have done somebody some good. Right? Well, yes. But perhaps we should look to see who benefited.
Cuts made in state income tax rates reduced revenue a total $579 million per year. Those in the lower 40% (under $28,000 income) of Oklahoma families received a cut averaging $29. Middle income families ($28,000 to $36,000) received savings of $128. The upper 1% received annual cuts of $11, 200.
How was the $579 million split proportionally among taxpayers? Which taxpayers walked off with all those tax cut dollars in their pockets? Well, 29% of those dollars, $169 million to be precise, went to the wealthiest 1% of taxpayers. The predominant part of the money, a whopping $423 million, went to the top 20% of taxpayers. The bottom 40% of families ended up with just $17 million of those tax cut dollars. Surely, that is of some concern. The rich get richer, and state services get cut.
Disregarding inheritance tax cuts, the second largest source of revenue reduction has been the increase in the standard deduction for taxpayers. When fully implemented, this will total $266 million a year in cost. While one might surmise that this would really benefit lower and middle income people most, it has not turned out exactly so. Of this $266 million some 60% goes to the upper 40% of taxpayers, and conversely 40% to the lower 60%. Not exactly a level playing field there either, it seems.
So, who has benefitted from Oklahoma tax cuts of the last few years? Obviously, the wealthier among us, who would presumably not be greatly hurt at all by paying those taxes, have been the big winners.
Who are the losers in all this? That is easy -- everyone who lives here or utilizes state services is a loser. Every state career worker has a problem. Every school kid is facing austerity. Every family with a college age student is looking at increased tuition, or maybe just passing up higher education. The prison system is in disarray, and becoming ever more hazardous to inmates and possibly the public. Abused and neglected children are left to be abused and neglected. The mentally ill are on the streets with no medication. Old people on Medicaid will be rationed on nursing home entry. The state’s credit rating could go bad, if it fails to support pension systems and honor bond payments from pledged present revenue. Yes, all these and more.
It is easy and popular with nearly everybody to cut taxes. This certainly endears the politicians with the richer, campaign donor class they love so much. But legislative profligacy in tax cuts has its deleterious effects on significant state services. The proof is here and now.
Dr. Edwin E. Vineyard, AKA The Militant Moderate
Schools and colleges have been faced with first 5% cuts in state funding and now with 10% cuts. Other state agencies and services such as corrections, mental health, social services for children, public safety, Medicaid, and even nutrition programs for the elderly have all made similar cuts. Some have furloughed employees; others have simply reduced services to clients in need.
The republican leader of the Oklahoma State Senate says that he looks upon this calamity as an “opportunity” to clean up state operations and bring more efficiency to state government. Heavenly Days! This is like the captain standing on the deck of the sinking ship, while crew and passengers slide into the water, and shouting, “Take courage, me hearties, we will be better off for all this!”
It is interesting how our media and politicians seem to blame only the economic downturn for our state revenue crisis. No one puts two and two together, it seems. There are bothersome inconsistencies in publicized reports of state economic data which should alert any thoughtful analyst.
As of now, Oklahoma is reported to have the worst revenue shortfall, relative to size, of any state in the country. Yet our economy has been reported to be one of the least affected by the recession.
Does anyone remember all those reports which said that the Oklahoma economy has not been nearly as badly damaged by the recession as the economies of other states? Has anyone looked at reported unemployment statistics in Oklahoma compared to other states? Has anyone noticed that our unemployment rate is one of the lower ones?
Has anyone wondered how Oklahoma’s economy can look relatively good compared with other states, have lower unemployment rates, and yet have the worst revenue shortfall problem in the country? Look no further. The answer is really not all that difficult.
Our current revenue shortfall is something around $900 million to a billion. Tax cuts by the Oklahoma legislature from 2004 through 2006 amounted to a total annual reduction in revenue of about $845 million. In 2008 some further tax breaks were given.
It is easy to see that Oklahoma would not be suffering such severe budget cuts today if the legislature had not been shortsighted and reckless with its earlier tax cuts. There would be a bit of a problem, but it would be a relatively minor one to handle. Retrenchment, if any, would be back to a higher base level.
So, let’s quit blaming the recession for everything, and start putting responsibility where it belongs – on the crowd-pleasing, fiscal foolishness of our own state legislature.
Another perplexing observation is how so many of our state political leaders, media, and citizens are so ready to criticize national spending in the recession stimulus package. They are ignoring the fact that those stimulus funds have already saved the State of Oklahoma from utter and complete disaster. Without federal stimulus funds we would already be nailing plywood on a lot of school house windows and public offices, shutting down roads and bridges, and turning convicts loose.
Why are we in Oklahoma so reluctant to give credit where it is due and place responsibility where it belongs?
Now, one would think that since those tax cuts have done the state’s finances so much harm, then surely they must have done somebody some good. Right? Well, yes. But perhaps we should look to see who benefited.
Cuts made in state income tax rates reduced revenue a total $579 million per year. Those in the lower 40% (under $28,000 income) of Oklahoma families received a cut averaging $29. Middle income families ($28,000 to $36,000) received savings of $128. The upper 1% received annual cuts of $11, 200.
How was the $579 million split proportionally among taxpayers? Which taxpayers walked off with all those tax cut dollars in their pockets? Well, 29% of those dollars, $169 million to be precise, went to the wealthiest 1% of taxpayers. The predominant part of the money, a whopping $423 million, went to the top 20% of taxpayers. The bottom 40% of families ended up with just $17 million of those tax cut dollars. Surely, that is of some concern. The rich get richer, and state services get cut.
Disregarding inheritance tax cuts, the second largest source of revenue reduction has been the increase in the standard deduction for taxpayers. When fully implemented, this will total $266 million a year in cost. While one might surmise that this would really benefit lower and middle income people most, it has not turned out exactly so. Of this $266 million some 60% goes to the upper 40% of taxpayers, and conversely 40% to the lower 60%. Not exactly a level playing field there either, it seems.
So, who has benefitted from Oklahoma tax cuts of the last few years? Obviously, the wealthier among us, who would presumably not be greatly hurt at all by paying those taxes, have been the big winners.
Who are the losers in all this? That is easy -- everyone who lives here or utilizes state services is a loser. Every state career worker has a problem. Every school kid is facing austerity. Every family with a college age student is looking at increased tuition, or maybe just passing up higher education. The prison system is in disarray, and becoming ever more hazardous to inmates and possibly the public. Abused and neglected children are left to be abused and neglected. The mentally ill are on the streets with no medication. Old people on Medicaid will be rationed on nursing home entry. The state’s credit rating could go bad, if it fails to support pension systems and honor bond payments from pledged present revenue. Yes, all these and more.
It is easy and popular with nearly everybody to cut taxes. This certainly endears the politicians with the richer, campaign donor class they love so much. But legislative profligacy in tax cuts has its deleterious effects on significant state services. The proof is here and now.
Dr. Edwin E. Vineyard, AKA The Militant Moderate
