OKLAHOMA CITY -Oklahoma should concentrate on improving services such as education instead of cutting taxes if it wants to improve the state's economic fortunes, according to a visiting economist.
Dr. Steven Gold, a senior fellow at the Urban Institute and nationally known economist, testified before the Senate Education Committee today.
According to Gold, Oklahoma is a low tax state, but it is also a low service state, meaning it doesn't spend as much as other states on education and other services that new and existing industry value. Because of that scenario, Gold says he doesn't think Oklahoma would derive much economic benefit from a tax cut.
"I doubt that it would help to cut taxes in Oklahoma," Gold told committee members. "If you're concerned about being competitive, you look at where your business taxes are" in regard to specific industries in state by state comparisons.
"The figures show that business taxes in Oklahoma are already low. The property tax is the biggest tax businesses pay and Oklahoma is exceptionally low on that," said Gold.
"I think Dr. Gold's testimony proves that we're on the right track," said Senator Cal Hobson, referring to the Senate leadership's program that will make significant investments in all three branches of education this year. "We're trying to focus our resources on the economic development tool that needs the most attention.
"By any measure, Oklahoma is a low tax state that doesn't spend enough money on education. The way you remedy that problem is by investing in education, not by cutting taxes."
Earlier this session, the Vice-chairman of the Senate Appropriations Committee requested a study of Oklahoma's tax rankings. The major findings included:
-Oklahoma ranks 44th in overall per capita state/local taxes;
-Oklahoma ranks 48th in property taxes;
-Oklahoma ranks 43rd in corporate taxes;
-The average Oklahoman pays $544 less in state/local taxes per capita than does the average American citizen;
-Oklahoma cut taxes by $19 million last year, the second highest reduction of any of the surrounding states;
In state-by-state comparisons of per pupil expenditures on education, Oklahoma ranks in the bottom 10 nationally.
"It may be an old cliché, but it's certainly true in this instance. Oklahoma is only as strong as its weakest link in the competition for new jobs.
"The strongest link in our economic development chain is Oklahoma's low tax status. The weakest link is education. The common sense approach, the approach the experts suggest, is to focus our resources on our weakest link, education," said Senator Hobson.
On other topics, Gold stated that when adjusted for cost of living, Oklahoma's per capita personal income jumps from 82 percent to somewhere between 90 and 98 percent. A recent Senate study placed the COL adjusted personal income at 98.1 percent.
Gold also said the so-called federal devolution would present both problems and opportunities for Oklahoma. On education, for example, there will be more flexibility in federal funding, but less money for states to spend. Gold pointed out that Oklahoma will have to be prepared to pick up the slack left by future federal education cuts which will approach 26 percent by the year 2002.
Given the uncertain federal budget situation, Gold advocated a conservative fiscal strategy for states that would preserve their respective funding bases.
"With federal cuts threatening what is already a relatively bare bones education budget in Oklahoma, we can't afford to fritter away precious resources on tax initiatives that won't help our economic development efforts. The rational, conservative approach is to direct those resources where they will do the most good, in this case, education," said Senator Hobson.