(The Center Square) - A report by Oklahoma's Legislative Office of Fiscal Transparency recommends the state simplify its tax structure and create a savings fund not bound to constitutional limitations.
The Sooner State tax burden of 4% on businesses is already one of the lowest in the region, according to the report.
Oklahoma is one of only 11 states in the U.S. with a corporate income tax rate below 5%, according to a recent report from the Tax Foundation.
But the state relies heavily on corporate taxes, according to LOFT. Nineteen percent, or $2.4 billion of Oklahoma's total tax revenue, came from "gross production, corporate income, franchise and withholdings for pass-through entities," according to the report. Gross production and corporate income taxes are unstable, so Oklahoma's tax base is the ninth most volatile in the country, LOFT said in its report.
"Additionally, Oklahoma's tax structure is reliant on statewide taxes, which accounted for an average of 63% of total tax revenues from 2015-2020," the report said. "This is in stark contrast with neighbors like Texas, which vests the majority of its taxing power in local entities."
Simplifying the state tax code would have little impact on revenue and make Oklahoma more competitive for business, LOFT said in its report.
Oklahoma faces challenges due to the volatility in its tax base, according to LOFT. The state had $1.45 billion in its Revenue Stabilization and Rainy Day funds, which represented 5.4% of total spending for state services for fiscal year 2021, the report said.
"Raise the cap on total deposits allowable to the Revenue Stabilization Fund so the state can reach the recommended savings level of 15% of outlays as well as provide the ability to hold reserves to plan for transitioning tax policy," LOFT recommends. "Alternatively, create an additional state savings fund not subject to constitutional limitations for the purpose of capturing revenues from a transitioning tax source for one year in order to offset potential revenue losses."
During their study, LOFT found that businesses focus on workforce and infrastructure, according to LOFT.
"For example, the Department of Commerce reports that lack of sites with utility infrastructure is the single greatest factor in not securing a prospective business," the report said. "Meanwhile, a survey by the Oklahoma State Chamber reflects workforce needs are the biggest concern among surveyed business leaders."
LOFT is working on a workforce study that should be completed in about eight months, Executive Director Mike Jackson told the LOFT Committee on Monday.
via Oklahoma's Center Square News