Scientific Study Provides Data to Policymakers
As Mayor Bartlett prepares to leave office, he is looking out for the future of Oklahoma and Tulsa.
Bartlett initiated a sales tax diversification study and is inviting state and local leaders to use it as a foundation for additional research, as they continue discussions on how to improve Oklahoma and Tulsa's finances.
"There had been discussion at the municipal level about the need to study sales tax diversification, but I was very encouraged when Gov. Fallin brought up the concept during her State of the State address this year," Bartlett said. "The state began to look at expanding the sales tax code before the budget session, but they need more data to really get the discussion off the ground."
Bartlett's Chief of Staff Jarred Brejcha managed the study, which was conducted by Dr. Ali Nejadmalayeri of Oklahoma State University.
"This study fuels the discussion for addressing finance issues and providing more resilient solutions for priority state government services, such as education and teacher pay," Brejcha said. "If we broaden the tax structure, we can also create revenue offsets. With more services included in the base, state leaders could lower income tax or reduce the overall sales tax rate in the state, and cities would automatically follow."
The State and City tax structures are streamlined, meaning the legislators must enact tax reform at the state level, which is automatically applied to the municipalities. Brejcha said it is important for local officials to be involved in the discussions at the state level since they would also dictate what rates are levied locally.
"The current structure primarily taxes merchandise, and includes very few services. It is a regressive tax placing more of a burden on buyers living on a lower or fixed income. If services are included in the tax base mix, then you even out the burden and distribute fairly to those who are using the taxable services. A broadened base gives us the opportunity to create a more favorable rate overall."
Bartlett joined with the Oklahoma Municipal League to resonate an important message for legislators and officials who want to broaden their tax base. Oklahoma collects 4.5 percent in sales tax revenues, while cities and towns are constitutionally required to rely on additional sales tax revenues for their operations and capital programs.
Bartlett said the study does not make any taxing recommendations, nor is he suggesting specific course of action.
"I'm giving this to state and local officials to further the discussion. State and city tax structures should be more aligned with the modern economy, which is service based," Bartlett said.
In Tulsa, 78 percent of the total payroll is attributed to the service sector, and represents $3 billion of the total $4 billion local payroll, according to the study.
"We must closely tie the tax base to the economy. We can have healthier economy by creating a healthier tax base and lessen the burden to all consumers, especially those with lower incomes who are buying only necessary items."
Many services are tied to the local consumer, taxed at the point of delivery, while others can be provided from any location, such as legal and accounting professions.
As a result, Bartlett said examples of service categories for the purposes of this study included plumbing, mechanics and lawn care. Bartlett said it would be unwise to tax healthcare, some professional services, and public institutions. The Tulsa study used the 2002 Citizen and Legislator Task Force Study to choose what services to include as likely taxable. All services were measured.
"This methodology can be used as a tool for policymakers to address the biggest shortfalls," Bartlett said. "And it can start moving Oklahoma and Tulsa's tax model into the 21st Century."