Sunday, December 20, 2020

OCPA: To diversify economy, get rid of the penalty on work

To diversify economy, get rid of the penalty on work
By Jonathan Small

For too long, Oklahoma has tried to diversify its economy by passing special-interest tax breaks and subsidies. That bureaucrat-planning has failed.

It doesn’t have to be this way if lawmakers embrace the policies that are reaping job growth in other states—and elimination of the state income tax, the penalty on work, is the most obvious tool for success.

The New York Post recently reported that Goldman Sachs, “known for its Democratic-leaning and virtue-signaling leadership,” is nonetheless looking to move part of its workforce from New York City “to some of the reddest states in the nation,” including no-income-tax states Texas and Florida. Nashville, located in no-income-tax Tennessee, was also cited as a potential landing spot for relocating firms.

Goldman Sachs is not an anomaly. Hewlett Packard Enterprise and Oracle are moving their headquarters from California to Texas, while E-cigarette maker Juul Labs has already moved its corporate office to that state. Elon Musk is moving to Texas and his company, electric-car maker Tesla, is building a new facility near Austin. The Austin Chamber of Commerce reports 39 companies have relocated there this year.

Companies and executives from states with some of the nation’s highest tax and regulatory burdens—think California, New York, Illinois—are moving to Texas, Florida, and Tennessee with increasing speed. Oklahoma has seen the loss of headquarters and hundreds of thousands of jobs from Phillips Petroleum, Hilti Corporation, Noble Drilling, SolarWinds, Kerr-McGee, and small businesses and family businesses too numerous to count. Oklahoma also lost out in the competition to become the location for building Tesla’s cyber-truck.

Those relocating include the decisionmakers who determine where thousands of jobs will be located.

The website How Money Walks has long tracked the flow of income across state lines. From 1992 to 2018, that organization found Oklahoma lost $1.79 billion in adjusted annual gross income (AGI). Much of that income loss shifted to Texas and Florida.

In contrast, the nine states with no state income tax all experienced a net increase in income during that same period—even South Dakota and Wyoming. South Dakota gained $1.21 billion in annual AGI while Wyoming gained $2.3 billion.

Those results are not tied to nice weather or sandy beaches. Oklahoma has geographical advantages that should make it much more attractive to new businesses than those two states, yet they are still gaining income while Oklahoma loses it.

The most obvious explanation for the discrepancy is tax climate. Job creators are attracted to states that offer the best return on an entrepreneur’s investment.

Right now, Oklahoma is not among that group. But if our lawmakers show vision by eliminating the state income tax, eliminating taxes on food and groceries and moving to a consumption tax, then Oklahoma can join the club of states that become a destination for capital investment, rather than the place “where we used to live.”

Jonathan Small serves as president of the Oklahoma Council of Public Affairs.

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