What tax warning does the Massachusetts study hold for Oklahoma? A key point of disagreement in the ongoing budget talks between the governor and legislative leaders is the rate of income tax.
A zero-growth trajectory for Oklahoma’s individual income tax has the support of Governor Kevin Stitt and members of the House of Representatives, spearheaded by Speaker Charles McCall. The proposal calls for a quarter-point cut to Oklahoma’s income tax rate for each fiscal year in which the state’s surplus is $400 million or higher.
At present, 4.75 percent is the highest tax rate in the state.
Instead of proposing a change to the tax rate, critics have suggested keeping it the same and increasing spending in other areas.
Legislators who put expenditure cuts ahead of income tax reduction should be warned seriously by a new report out of Massachusetts.
Massachusetts ranks highly in sectors like education and healthcare, but its net outmigration rate is increasing. Not to mention that a disproportionate number of its citizens are relocating to states with lower or nonexistent revenue taxes.
One of the top three causes underlying the trend of net outmigration from Massachusetts is income-tax rates, according to the Massachusetts Outmigration Study issued by Boston University.
Money lost in the billions in adjusted gross income and related state income tax collections is a direct result of that outmigration. Tax revenues are falling as a direct result of rising income-tax rates.
Massachusetts’ net outmigration rate has jumped 1,100% since 2013.
The state’s income tax revenue dropped by $213.7 million, or $4.3 billion, in 2020 and 2021 alone as a result of net outmigration.
Due to a decline in residents paying income taxes, Massachusetts has seen a loss of $821 million since 2011.
According to the analysis, Massachusetts stands to lose $961 million in annual income taxes and $19.2 billion in adjusted gross income by 2030 as a result of net outmigration.
The study did not account for the potential loss of revenue from sales, capital gains, property, and inheritance taxes as a result of net outmigration, therefore the actual loss is probably far higher.
The study found that every one of the top eleven states where people left Massachusetts had lower income taxes. Despite the fact that just 18% of the other states had better education quality and none had better healthcare quality than Massachusetts, those states were more appealing to former residents of Massachusetts.
According to the research, a large number of middle-class and lower-class families, as well as individuals in the “24 to 64 age brackets,” are leaving the Massachusetts workforce.
The study found that during the past ten years, the states of Florida, New Hampshire, Maine, North Carolina, and Texas have been the top five destinations for those leaving Massachusetts.
Among those five states, Oklahoma’s tax rate is the highest. There is no state income tax in either Florida or Texas. With the exception of interest and dividend income, which is subject to a three percent tax, New Hampshire does not impose a personal income tax. In comparison to Oklahoma’s 4.75 percent top rate, North Carolina’s highest rate stands at 4.5 percent.
Additionally, unlike Oklahoma, North Carolina allows married couples to take a standard deduction of $25,500.
When it comes to Oklahoma’s income tax, Stitt and other House leaders have been pushing for a flat rate that starts at $13,350 for individuals and $27,100 for couples, heads of household, and eligible widowers.
Incomes above $7,200 for single taxpayers and $12,200 for joint filers are subject to Oklahoma’s top personal income tax rate; those with incomes below those levels are subject to lower rates.
The 12 Myths section is a part of the paper from Boston University. Researchers have discovered several myths, such as the following: that high-income households “show a lower rate of outmigration than other income groups,” that Massachusetts’ high-quality healthcare, regardless of cost, is a strength and helps in population retention, that state tax rates “don’t have significant impact on where high-income households choose to live,” and that future net outmigration won’t materially impact state income tax collection or dull economic prospects.
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While Oklahoma is slipping behind in the tax race despite lowering its top rate two years ago, the outmigration report from Massachusetts places strong emphasis on the importance of lower personal income taxes.
According to ocpathink, The Tax Foundation reports that as of the beginning of 2024, three of Oklahoma’s bordering states had lower income tax rates than Oklahoma. These states were Colorado (4.4 percent), Arkansas (4.4 percent), and no-income-tax Texas (4.5 percent).
The highest rate in neighboring Missouri was 4.8%, which was just slightly greater than Oklahoma’s 4.7%.
Among the states that share a border with Oklahoma, the only ones had noticeably higher personal income-tax rates were Kansas (5.7%) and New Mexico (5.9%). In this post, we have given information about the “What tax warning does the Massachusetts study hold for Oklahoma?”
Natalie Clydesdale is a journalist at oklahomansdecide.org, where she covers crucial local and state news with a focus on accuracy and depth. Her extensive experience in investigative reporting ensures readers receive clear and reliable information. Follow her latest updates on Instagram.
