A capital gains tax is, above all, a tax on small businesses, on entrepreneurs, on capital generation, on private investment, on job creation and on adding value to local and state economies. SB 1086, currently under consideration at the Oklahoma Capitol, would impose a capital gains tax by repealing our state’s capital gains deduction.
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Texas, the economy Oklahoma competes with the most every day, has no capital gains tax because Texas has no income tax. Imposing a capital gains tax in Oklahoma would leave our state at an even greater disadvantage versus Texas in terms of keeping entrepreneurs and job creators from leaving Oklahoma and taking job opportunities with them.
Taxpayers move, take their money to Texas
Since 1992, according to federal IRS data, Oklahoma has experienced a net loss of $1.5 billion in one-time annual taxable income to Texas — a state that does not tax income and does not tax capital gains. This $1.5 billion doesn’t even include all the additional lost taxable income in the years following a taxpayer’s move from Oklahoma to Texas.
The IRS data show that Oklahoma is losing more income tax filers — and more taxable income — than we gain each year, even while our state’s overall population grows. This means Oklahoma has an ever-smaller ratio of taxpayers compared to the ever-growing costs of the public services we expect our state and local government to provide.
We cannot continue losing our tax base to Texas
Small businesses, entrepreneurs and taxpayers can choose where they live and work. Far too often, they’re choosing to leave Oklahoma for a nearby state where the fruits of their labor aren’t taxed and where overall taxation is consistently lower.
Losing Oklahoma’s tax base to Texas makes it harder to pay for good schools, good roads, public safety and a safety net for our state’s most vulnerable citizens. It has gotten so bad — with Texas attracting Oklahoma taxpayers and draining our state’s tax base, year after year — that Texas is now stealing Oklahoma teachers by offering higher salaries funded by the taxpayers they already took from us.
Imposing a capital gains tax in Oklahoma will only turn away more small businesses, more entrepreneurs, more capital generation, more private investment, more job creation — more tax base.
Diversify beyond oil and gas
We must diversify Oklahoma’s economy beyond oil and gas so that, the next time oil prices plummet, we don’t find ourselves in this situation again — legislating by crisis, forced to hire too many emergency-certified teachers and vulnerable to the demands of tax consumers.
Adding a capital gains tax will also make it harder, not easier, to diversify Oklahoma’s economy beyond oil and gas. Oklahoma lawmakers should avoid the temptation — in the wild fever dream of the teacher’s union walkout underway at the state Capitol — to impose this destructive tax.