How Competitive Is Oklahomas Economy?
The results were positive for Oklahoma. The state moved up nine spots from 39th a year ago to 30th in overall economic competitiveness, and from 30th in 2022 to 19th in tax competitiveness. The improved tax ranking was the second largest jump of any state in the country, putting us within striking distance of a top ten ranking in the next few years. In fact, State Chamber Research Foundation (SCRF) Executive Director Ben Lepak said, “there’s no reason Oklahoma can’t be at the top in all these rankings.”
Three recent legislative reforms account for the state’s rise through the tax rankings: A) repeal of the franchise tax, which is a tax paid by certain enterprises that want to be chartered and/or do business in the state. That repeal alone raised our property tax ranking from 29th to 15th; B) elimination of the marriage penalty, which is an additional liability married couples often face over unmarried taxpayers when it comes to paying their taxes. Removal of this burden boosted our income tax ranking from 33rd to 24th; C) becoming the first state to allow permanent full expensing of capital improvements, which means companies can receive a 100% first year tax deduction (instead of spread out) for qualifying plant and machinery expenditures. That change along with a recent reduction of the corporate tax rate from 6% to 4% improved our state’s overall corporate tax ranking from 11th to 4th in the U.S.
Conditions might be right for some kind of reduction in Oklahoma’s individual income tax rate, which would further improve our state’s tax ranking. In recent months, Gov. Kevin Stitt has called for reducing the state’s top personal rate from its current 4.75%, and putting the tax on a path to gradual elimination by using its increasing growth revenue to offset rate reductions in future years. House Speaker Charles McCall has filed several bills to cut taxes by either a quarter or a half point for the 2024 legislative session. The SCRF wants Oklahoma to move from its current six income tax brackets to a single bracket – flat tax – while marginally reducing the rate. As well, recent surveys show Oklahomans favor reduction or elimination of the personal income tax.
“Everyday Oklahomans continue to feel the effects of destructive federal economic policies on their wallet, and they desperately need relief,” McCall said. “Our state is in a strong position economically and in regards to savings, so now is the perfect time to let the citizens of Oklahoma keep more of their hard-earned money.”
Oklahoma continues to compete well in the infrastructure category, moving from 13th nationally in 2023 to 12th in the latest rankings. The three subcomponents of this category are energy infrastructure, where we rank 1st in the nation, transportation infrastructure, where we come in 7th nationally in overall roads and bridge ratings, and broadband infrastructure, where we dropped slightly to 36th. Although we’re behind our competitors in taking advantage of recent federal funding of broadband expansion, the state created the Oklahoma Broadband Office in 2023 to help develop and administer federal grant programs that will make high-speed internet available to all Oklahomans. Total funding of all programs could exceed one billion dollars. Currently, 188,000 locations in the state are without access to even the lowest level of internet service, with the vast majority of them in rural areas.
Oklahoma fares considerably worse in the other categories which comprise The Scorecard’s rankings. We’re 42nd in workforce, 34th in legal climate, and 44th in both government burden and state healthcare system. These competitive shortcomings, the report concludes, are more the result of past policy choices than any natural disadvantage. That means they can be fixed, with policy reforms that will drive future economic growth and prosperity.
The workforce ranking is up two spots from 2023, but remains low mainly due to our deficient public K-12 public school system. Achievement levels, as measured by the National Assessment of Education Programs (NAEP), actually dropped to 48th in the nation. We’re, also lagging in STEM-related degrees (49th), bachelor degrees (43rd) and high school diplomas (37th) or their equivalent. Plus, our labor force participation rate is 39th, despite having a top-25 ranking in prime-age working age population.
However, help is on its way. A landmark universal school choice bill passed the legislature and was signed by the governor last year. It went into effect on January 1st. Oklahoma State University (OSU) has begun steps to expand its STEM and technology-degree driven programs at its Oklahoma City and Tulsa campuses. Oklahoma University (OU) plans to build a new polytechnic institute in Tulsa to meet increasing workforce demands. The Oklahoma State Regents for Higher Education (OSRHE) have requested a 12.2% budget request increase to provide funding for STEM-related disciplines and address the state’s shortage of doctors and nurses.
It can’t come a moment too soon. By 2027, an estimated 70% of all jobs will require education beyond high school. In Oklahoma, each of the 29 highest paid professions currently requires an associate degree or higher. “Producing more college graduates to address the needs of the business community,” says Chancellor Allison Garrett, “is our top priority and central to the success of our 2030 strategic plan.”
Various factors account for Oklahoma’s low ranking in healthcare. Finance website WalletHub ranks us 50th in percentage of insured adults and 47th in percentage of insured children. We’re 43rd in the number of physicians per capita and 27th in dentists per capita. We’re 44th in percentage of adults with no dental visit in the last year, 42nd in preventable hospitalizations and one of the five worst states in overall quality and price of our healthcare services.
We’re also worse than the national average when it comes to such health outcomes as obesity, alcohol abuse, suicide, smoking, cancer deaths, infant and maternal mortality and adults who report fair or poor health.
On the brighter side, OU Health Sciences is using a $16 million federal grant to recruit students from tribal, rural and underserved communities with the goal that those students will return to practice in those home communities. “The grant,” said OU medical professor Mary Gowin, “will help fill the critical medical workforce shortage in this state, where doctors are retiring faster than medical schools can replace them.”
OU Health Sciences also announced a 10-year strategic partnership with Siemens Healthineer, a global leader in medical technology. The collaboration aims to supply Oklahoma patients with the latest technology to address conditions that most affect them, such as cancer, cardiovascular disease, neurological and lung conditions. As well, a new VA Health Clinic will open this year in Vinita, the Choctaw nation is expanding their healthcare facilities in Tahlina, and construction has begun on a new $140 million children’s behavioral healthcare center in Oklahoma City. New federal and state laws have also been enacted in the last few years to require healthcare providers to publish a list of cash prices for their most common procedures. “Consumers know what it costs for groceries, to get their car serviced and repair their homes,” said Representative Carol Bush. “We should expect the same with health care.”
Impediments to Growth and Prosperity
To ensure further growth and economic competitiveness, Oklahoma should continue implementing the policy recommendations outlined in The Scorecard. Its citizens will benefit, and more businesses and individuals will keep moving here. However, progress could be stalled or reversed if certain initiatives are followed:
Raising the Minimum Wage - Supporters of an increase in the minimum wage filed an initiative petition to collect signatures to place State Question 832 on the ballot. The proposal would raise the minimum wage to $9 an hour in 2025, $10.50 in 2026, $12 in 2027, $13.50 in 2028 and $15 in 2029. At that point, wage increases would be tied to the Consumer Price Index, meaning the mandatory minimum could reach $35/hour within 15 years.
That would be disastrous for all but a handful of Oklahomans. Forced minimum wage increases cause employers to either reduce their number of entry level workers, cut hours and benefits of current employees, increase automation or have less money left over to invest in their business. Plus, businesses that are already struggling may be forced to close, leading to further job losses.
“Let’s be clear,” said Chad Warmington, president and CEO of The State Chamber. “Most of our members already pay well above the current minimum hourly rate for non-salaried employees.” For example, the average hourly salary of cashiers at Oklahoma Walmarts is $12.85 an hour, but goes as high as $22.10 per hour. Almost all range between $8.84 an hour and $25.88 an hour.
Corporate Welfare – When a business or class of businesses receive tax subsidies, cash incentives or other special treatments not available to other businesses or individuals, it’s called corporate welfare. Put simply, it takes money from the pockets of hard-working existing residents and redistributes it to a few corporations in the name of creating jobs and stimulating growth. Former Governor Fallin was and Governor Stitt is a big proponent, as is The Oklahoma State Chamber of Commerce and most state legislators. Examples of such largess include the $110 million of state incentives given to Canoo Inc. to build electric vehicles, the $700 million for Panasonic to build an electric vehicle battery plant, the generous subsidies to the wind and film industries, and The Quick Action Closing Fund, which was created in 2011 as a financial means to lure companies to relocate and expand in Oklahoma.
Two different studies rank Oklahoma in the top ten in the country in granting corporate subsidies to private companies. This “reverse Robin Hood” raises everyone’s state taxes to make up for the lost revenue and poisons economic development by encouraging cronyism over fair competition.
A better approach would be to continue lowering all income taxes while broadening the base. If we let economic growth happen in an organic market-driven way that’s fairer for all, we’ll see greater levels of prosperity and net in-migration. The sooner that state government, with encouragement by The State Chamber, gets out of the business of picking winners and losers, the better off all Oklahomans will be.
Tim Bakamjian is an independent real estate broker and investor living in Tulsa. He holds a bachelor’s degree in political science from Kenyon College in Ohio and a bachelor’s in journalism from the University of Tulsa. He’s married with one grown child. Political and economic issues have been a life-long interest. He may be contacted at: email@example.com