Small: Mississippi is beating Oklahoma (again)

Mississippi is beating Oklahoma (again)

By Jonathan Small

I recently noted that Mississippi students are dramatically outperforming their Oklahoma peers when it comes to reading.

Now Mississippi officials are seeking to dramatically outpace Oklahoma in the race for jobs by eliminating its tax on work and investment – the state income tax.

Mississippi currently has an income-tax rate of 4.7 percent, which is already lower than Oklahoma’s top rate of 4.75 percent, and the rate in Mississippi was also scheduled to fall to 4 percent in 2026.

But now, with passage of Mississippi’s House Bill 1, that state’s income tax is on the path to full repeal.

The newly passed legislation will continue cutting Mississippi’s income-tax rate, lowering it to 3 percent in 2027, then cutting another three-tenths of a point each year until the tax is fully repealed, potentially achieving full elimination by 2037.

This is not a minor change.

As I have long noted, because the income tax penalizes work and investment, it deters job creation. States without an income tax have long outperformed the rest of the country. Research shows that states with no income tax have seen their gross state product grow 13.77 percent faster than states with an income tax.

As that benefit compounds over time, the gap between no-income-tax states and their competitors only grows larger.

While Oklahoma’s income tax is lower today than in the 1990s, other states are not sitting still. Oklahoma must keep up. Otherwise, we will see investment skip our state for friendlier climates.

Oklahoma’s current 4.75 percent personal income tax rate is among the highest in the region.

Texas has no personal income tax. Colorado imposes a 4.4 percent rate. Arkansas’s rate is just 3.9 percent. The top rate in Missouri is 4.7 percent. Louisiana has cut its income-tax rate to 3 percent.

We cannot be content to simply outperform New Mexico. It’s time to approve legislation that uses growth revenue to automatically cut Oklahoma’s income tax until, gradually over time, the entire tax is eliminated.

And don’t buy the myth that Oklahoma’s property taxes will suddenly become sky high if we don’t tax work and investment. Five states with no personal income tax also have the same or lower effective property tax rates than Oklahoma.

In 2013, only one state had a lower score on the National Assessment of Education Progress (NAEP) fourth-grade reading test than Mississippi, and Oklahoma students were nearly a full year ahead of Mississippi students.

Today, only six states score higher than Mississippi on NAEP and Mississippi students now perform more than a year ahead of their Oklahoma counterparts.

The same trend could occur in the realm of taxation and job creation. If Oklahoma policymakers do not act, today’s Mississippi lead could turn into a rout.

Jonathan Small serves as president of the Oklahoma Council of Public Affairs.