Free Market Friday: Mississippi is beating Oklahoma (again)

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I recently noted Mississippi students are dramatically outperforming their Oklahoma peers in reading.

Now Mississippi is making similar moves in another realm 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. Mississippi’s rate was already 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 legislation will cut Mississippi’s income-tax rate to 3 percent in 2027 and then cut another three-tenths of a point each year until eliminated.

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.

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

Oklahoma’s 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 our state 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 (www.ocpathink.org).