Jason Murphey: How the services tax would harm Oklahoma’s economy

Over the past few months Oklahomans have been hearing about the attempt to enact a new tax on “services”.

Oklahoma law has historically held services harmless from direct taxation. Those who provide services must already pay income tax on their earnings.

It’s now being suggested that these individuals must also assess a “services” tax. You will pay this tax when you pay your bill to your service provider. It will be assessed much like a sales tax.

Here’s an example of how this new tax scheme will affect you: when you get a haircut at the barbershop the barber will add the new tax on his services to you. You will undergo two haircuts on that day: the first from the barber — and the second from a cash hungry state government.

It’s an extremely shortsighted move. Everyone loses when government creates new taxes and increases the tax burden on the public; but that’s not all at stake with this punitive proposal.

At special risk in this matter are the characteristics that make Oklahoma an attractive place to live.

Here is just one example: the new services task will significantly impact the housing industry.

Home builders and their subcontractors would be forced to pass on the cost to buyers.

Relators would also have to potentially pay the tax; a special challenge because they work on commission.

All of this would diminish one of the state’s foremost advantages over other venues: low housing costs.

New residents, especially retirees, move to Oklahoma to take advantage of the lower cost of living and affordable housing.

These new Oklahomans are able to sell their real property assets in other venues, take the proceeds and invest in Oklahoma real estate for a fraction of the cost of the real estate in their previous state of residence.

Deprived of this advantage, these individuals may choose to move to another state. The economic benefit they would have provided to Oklahoma will go with them.

Thus the folly of tax policy that is contrived in the state capitol far away from the real world and the free market: new taxes do not always result in more revenue. In fact, the harm caused by the new tax may cause the government to lose revenues that it would otherwise have captured.

I feel like state government leaders should use the occasion of the state’s economic downturn to invest energy and political capital on behalf of the many potential efficiencies and reforms to the current governance structure — instead of working for punitive new tax increases.

Source post