Pictured: Charlie Meadows
Governor Stitt, Not an Economist - Why his push to eliminate grocery sales tax is misguided!
The governor has stated he wants Oklahoma to be a top ten state and it seems his number one effort to accomplish that goal it to bring more jobs to Oklahoma. Bringing jobs to Oklahoma seems so important that he has pushed the legislature for hundreds of millions in taxpayer dollars to practice Crony Capitalism. Crony Capitalism is when government picks the winners by subsidizing or bribing (oops, I meant to say incentivizing) businesses to locate or expand in Oklahoma. That pretty well defines Crony Capitalism rather than Free Market Capitalism.
He has certainly been successful in bringing jobs to Oklahoma using that method, but there is another way. The free-market way to stimulate job growth is to speed up permitting processes, git rid of unnecessary regulations, eliminate corporate income taxes, and reduce or eliminate the state’s personal income tax. However, it is hard to eliminate those taxes when you give away hundreds of millions of taxpayer dollars to businesses. It makes no difference if you give tax dollars away in up front subsidies, or back-end kickbacks such as through Oklahoma’s Quality Jobs Act.
When I was associated with OCPAC (Oklahoma Conservative Political Action Committee) – back when it was a actually a PAC – I interviewed candidates before endorsing or contributing to their campaigns. It is now a 501 (c) (3) organization and no longer able to contribute to candidate campaigns, even though they are still using the same identification as a PAC.
In that process we had a ten-question survey that candidates had to fill out and then appear for an interview. In addition to the ten questions on the survey, we had several surprise questions. One of the surprise questions was to determine their basic knowledge of economics. The following is that question:
If you could reduce or eliminate only one of the following types of taxes, which would you chose to best stimulate the economy of Oklahoma? (1) personal income taxes, (2) sales taxes on groceries, or (3) Oklahoma’s corporate income tax?
Of the three choices there is only ONE wrong answer and that is sales taxes on groceries. Most candidates would not choose the grocery tax, and thus chose one of the other two. Here is the reasoning: if you reduce or eliminate the corporate income tax, that lowers the cost of doing business in Oklahoma. That in turn makes what is produced here more competitive in the national or international marketplace. When it comes to the personal income tax, reducing or eliminating such, increases the take home pay for employees regardless of if they are the CEO or a janitor to be higher without having to raise wages. That makes Oklahoma a more desirable place to locate or work for a business than other states with income taxes.
However, eliminating the sales tax on groceries does nothing to stimulate economic growth. This tax is circular in that it is collected by government then distributed back into the economy through government spending. Some of that will go into welfare payments, government worker wages, etc. Unfortunately, some of that will end up leaving the state anytime state government purchases products or services out of state.
Also, in some cases, the sales tax on groceries is the only direct tax people pay. If people living on some form of welfare pay no taxes, they are motivated to have government continually increase their welfare benefits and they couldn’t care less about taxes being raised. However, having to pay the sales taxes on groceries is at least a little skin in the game. At least they are paying back a few of the tax dollars they receive when they get their various forms of welfare.
There are two sides to an economy, the consumption side and the production side. It is a well-known principle that whatever you tax you will have less of it, and whatever you do not tax you will have more of it.
Governor Stitt, if you want to see the economy grow through a free market form of economics, then first eliminate the corporate income tax, and then work on eliminating the personal income tax. Government should try to get its necessary revenues to operate from the consumption side of the economy, such as sales taxes on groceries. Eliminating taxes on the production side of the economy will increase the number of jobs in Oklahoma. That in turn will cause businesses to compete for workers which then causes wages to rise. Having higher wages is a good thing for the people of Oklahoma.
Texas does not have a corporate income tax, personal income tax or sales taxes on groceries. While Texas does have exceedingly high property taxes, the growth rate for Texas has far exceeded the growth in Oklahoma for many years.
While every state must get their taxes from somewhere, Texas has proven to be a more efficient state when it comes to tax burden on its citizens. My statistics are a little outdated, but a citizen in Oklahoma at one time paid about 18% of their gross income in state taxes while citizens in Texas spent about 14%.
I dream of a day we will have a governor that understands these things and strives to educate citizens on these principles. To do so, would truly make Oklahoma a top ten state in short order.
Charlie Meadows is the founder and former president of the Oklahoma Conservative Political Action Committee (OCPAC). He recently won a Special Election becoming County Commissioner for District 2 in Logan County. He may be contacted at: firstname.lastname@example.org