Small: Standing still is a poor strategy in state competition

Standing still is a poor strategy in state competition

By Jonathan Small

In politics, there is an unfortunate tendency among lawmakers to pass significant policy reforms … and then rest on their laurels.

Unfortunately, one year’s progress does not translate into permanent victory, as can be seen in the latest edition of the “Rich States, Poor States” report authored by economists Arthur Laffer, Stephen Moore, and Jonathan Williams.

The report ranks states in a variety of categories, including tax rates, workers’ compensation costs, and the number of public employees, among other policy variables.

In the latest edition, Oklahoma fell out of the top 10 states.

This year’s publication ranked Oklahoma 11th for its economic outlook. That’s a significant decline since Oklahoma was ranked as high as third just four years ago. The decline in Oklahoma’s ranking is primarily the result of stagnation, not the rollback of past reforms.

Put simply, officials in other states across the country have proceeded with tax cuts. Policymakers in those other states are continuing to work on generating a pro-growth climate. As those states have progressed, Oklahoma has largely stood pat. Oklahoma fell four spots since 2021 in both the “Top Marginal Personal Income Tax Rate” and “Personal Income Tax Progressivity” variables as other states cut their taxes and moved to flat rates.

To cite just one example in our immediate region, Arkansas moved ahead of Oklahoma in the report’s rankings thanks to an aggressive series of tax cuts. Arkansas came in at number 10, which is 13 spots ahead of where Arkansas was ranked in 2021.

Louisiana has seen a similar climb after extensive tax cuts, moving from 27th to 18th since 2018.

Our lawmakers have done much to make Oklahoma more competitive and attractive to those looking to work and invest. Our top income-tax rate has been cut from 7 percent in the 1990s to 4.75 percent today, among other reforms.

If officials in other states had not chosen to respond by cutting rates in their states, Oklahoma might still be in the top 10. But that’s not how competition works. It’s not enough to place in the top 10 one year. The challenge is to stay there.

Early in its existence, Ford dominated car sales because of its assembly line reforms – which included producing only black cars because changing colors slowed the process. The company ultimately had to shift strategies and offer additional colors to stay competitive. Oklahoma lawmakers must have a similar mindset to keep our state growing in population and economic power.

That means Oklahoma lawmakers must continue to reduce our state’s tax burden, preferably putting the personal income tax on a path to repeal, so we remain one of the nation’s most attractive states to both those who want to create jobs and those who want to fill those positions.

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