Individual income tax reduction leads to more economic activity
TOPEKA, – CPA Steve Anderson, of the Oklahoma Council of Public Affairs, recently completed a study comparing tax rates and structures for Oklahoma and Kansas over the last ten years. “A Tale of Two States: The Real Effect of Individual Income Tax Cuts” points out how the two states had similar tax rates ten years ago but how things have changed dramatically since.
“Mr. Anderson has found evidence of what Americans for Prosperity has been saying for years,” said AFP-Kansas state director Derrick Sontag. “We can see how the reduced individual income tax rates in Oklahoma led to increased state revenues through sales taxes, indicating Oklahomans were able to keep – and in return, spend – more of their dollars.”
Kansas began the decade with a lower individual and corporate tax rate, but a higher sales tax rate. Kansas raised its sales and corporate tax rates, as Oklahoma began reducing the individual income tax rate while its sales and corporate tax rates remained constant.
According to Anderson’s paper, one of the effects of Oklahoma’s reduction of the individual income tax rate was an increase in economic activity as measured by sales tax collections. In Fiscal Year (FY) 2005, when the Oklahoma’s individual tax rate started to fall, sales tax revenues began to increase in relation to Kansas.’
“We plan to show Legislators raising tax rates is not the most effective way to raise states revenues, and we hope the message will ring loud and clear: let Kansans keep more of their hard-earned dollars,” Sontag said. “That is the true road to a more prosperous Kansas economy.”