The 2023 state legislative session had many successes and now a major issue is primed for implementation in 2024—passage of significant income tax cuts. The need for further reductions in Oklahoma’s penalty on work, the personal income tax, is greater than ever. The massive inflation unleashed under the Biden administration has been historic, surpassing anything seen in decades. What $1 bought in 2020 now [requires](https://protect-us.mimecast.com/s/GGTEC1woYlsMXKnZfLtsdi?domain=in2013dollars.com) $1.19. What $5,000 dollars purchased in 2020 now requires $5,946. That’s a cumulative price increase of 18.92%. Inflation has outpaced wage growth, meaning most people are effectively earning less today than when Donald Trump was president. And the damage is not limited to family budgets. A recent Bank of America [survey](https://protect-us.mimecast.com/s/r8B_C2kpgmTpQAKms1F31J?domain=msn.com) showed 78% of small business owners identify inflation as their primary concern. State policy cannot completely undo the damage wrought by federal policy—but it can mitigate the damage. State personal income tax cuts will increase the take-home pay of all Oklahoma workers, effectively raising wages despite inflation. And tax cuts increase the incentive for business owners to make investments that ultimately grow the economy and boost job numbers and pay. A full-scale overhaul of Oklahoma’s tax code that immediately fully repeals the personal income tax would provide the greatest economic turbo-charge. If a longer implementation period is desired, the tax can be put on a path to full repeal by gradually lowering the rate over time. It’s undeniable that states with no income tax have enjoyed much stronger economic growth for much longer than their counterparts. Oklahoma should join that club. The arguments of tax-cut opponents have been completely obliterated by real-world experience. In the 1990s, Oklahoma’s top income-tax rate was 7%. Today it is 4.75%. Yet Oklahoma government has not been “slashed to the bone” during that time. Instead, state government spending is at an all-time high today even as the personal income-tax rate is 32 percent lower than in the 1990s. (The state budget shortfalls that culminated in 2018 were the result of a major oil bust, not tax cuts.) Put simply, Oklahomans need income-tax cuts. And tax cuts are not only good politics in this environment, but good policy as well. – Jonathan Small serves as president of the Oklahoma Council of Public Affairs (www.ocpathink.org).
