How will Oklahoma Solve it’s Budget Pickle?

Taxes!  Budgets!  What boring topics we are obliged to discuss.  But such is what we are faced with: a 1.5 billion dollar budget hole.

Citizens demand certain services from the state government; and then seem surprised when they have to pay for them.  Especially now that oil tax revenues have dropped off so drastically – and most of the solutions offered thus far deal with increasing sales taxes.  Can’t our legislators be any more creative?

There are two major expenses which the state government must figure out a way to not only fund, but increase funding due to popular demand: education and medicaid.

Legislators have been quick in offering a few solutions, meanwhile frightening Oklahomans into submission: that these tax increases are essential in order to keep the state running.  And because cutting expenditures is absolutely out of the question, for political reasons, we will have to determine which bitter pill is the least so.

First there’s the cigarette tax.  That’s always the old standby, as politically it isn’t that harmful because it’s accompanied with promises that it will decrease smoking and eventually decrease medical costs associated with tobacco use.  But $1.50 per pack?  Well, that is something new.  I heard a figure cited that $182 million could be raised in this way; I do wonder if that number takes into account either, a) the people that stop smoking or b) the people that would be driven across state lines to buy their tobacco products, hurting our retailers in the process.  Either way, the sum raised by this sort of tax hardly goes a long way in filling the shortfall.  A cigarette tax would have to be accompanied by another tax which is much more effective.

Besides, as stated in the Oklahoman article of May 1, this would only go so far as to “stabilize” the current medicare provider rates, which implies that it is a temporary measure only with no way of addressing future provider rate hikes.

Secondly: Insure Oklahoma.  This proposal has been floated around for a little while and seems to be the favorite of some of the more powerful circles, raising a cause for concern.  The summary (might be an oversimplification) is that we would take federal money to fund an Oklahoma program called “Insure Oklahoma.”  Now there is no doubt that the idea of taking federal money leaves a bad taste, much like orange juice and toothpaste.  But it is our money, right?  And if we can’t have our money back in our bank accounts, at least we can have it back in our state to alleviate a further burden.  But, alas!  When it comes to taking money from the feds, it never comes easy – there is always strings and obligations attached.

Likewise with the proposal to transition some medicaid recipients onto private plans.  That has a better sound to it, except that it would essentially amount to the same thing: taking federal money.

The other option, and actually the most economically sensible plan thus far, is “modernizing” the tax code.  First, to charge sales taxes on services not before taxed, such as haircuts, plumbing services, etc.  I don’t think this will be as economically harmful as increasing the sales tax across the board; in fact, I was surprised that those things weren’t taxed already.  After all, it is really quite unfair that most services are taxed, but some are not (when we buy things, we don’t buy the thing itself, but the service of having it formed into it’s present shape.)

However, I doubt that the expansion of a sales tax would go a long way in filling such a deep hole.  It would have to be, in order to have some meaningful effect, be accompanied by an internet sales tax.  To place a tax on the last truly free market is reprehensible to me, even if other states are doing it; but the hole must be filled.  If it was a temporary proposition I would be all for it; but there’s no such thing as a temporary tax.  It pains me to say it, but this might be our best option for filling the budget hole.  But an internet sales  tax should be only a last resort!

There is of course using the entire rainy day fund, with the hope that oil tax revenues go up to their previous levels in the future.  Even still, it would have to be accompanied by another drastic measure, as the contents of the rainy day fund could only fill the hole about halfway.

To alleviate education expenses, some have proposed that we consolidate the school districts, saving money on administrative expenses.  I think it’s a fantastic idea; but something I think should happen regardless of a shortfall and besides, I don’t think it would fill it.

In order to fill the hole we would have to decide which combination of taxes and measures would be the least economically harmful to the State.

When oil prices return to their past levels, as they might, what will happen?  Will the taxes necessitated by present circumstances be removed?  Of course they won’t; taxes are permanent, and typically are forgotten very quickly.

We have a republican governor, and a republican majority in both the State House and Senate.  These are republicans who espouse any number of fiscally conservative talking points:  We must cut government.  We must cut spending.  We must protect the taxpayer.  And the voters, naturally, support such candidates because they are of the same opinion, at least until it actually comes to cutting government services which benefit them.  An ever deepening gulf between theory and practice.  



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