Path Home Shows 2012 Show Archive February 2012 Show 1207 Mickey Hepner Interview - Economic Outlook from UCO Economist

Mickey Hepner Interview - Economic Outlook from UCO Economist

We visit with Mickey Hepner, an Economist at UCO, who warns we may want to think twice before trying to fix something that isn't necessarily broke...state taxes.
Mickey Hepner Interview - Economic Outlook from UCO Economist

Rob McClendon and Mickey Hepner

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University of Central Oklahoma

Show Dates

Show 1207: Mickey Hepner Interview - Economic Outlook from UCO Economist

Air date: February 12, 2012

 

Transcript

ROB MCCLENDON:  NOW ONE OF THE RECOMMENDATIONS TO REDUCE OUR STATE INCOME TAX COMES FROM THE GOVERNOR’S OWN TASK FORCE ON ECONOMIC DEVELOPMENT AND JOB CREATION THAT RECOMMENDS, AND I QUOTE HERE, GOVERNOR FALLIN SHOULD INITIATE A TEN-YEAR PROGRAM TO SIGNIFICANTLY REDUCE, THEN ULTIMATELY ELIMINATE, THE OKLAHOMA PERSONAL INCOME TAX.  BUT ANOTHER WELL RESPECTED GROUP OF STATE LEADERS SAYS WE MAY WANT TO THINK TWICE.  OUR GUEST TODAY IS THE DEAN OF THE COLLEGE OF BUSINESS ADMINSTRATION AT THE UNIVERSITY OF CENTRAL OKLAHOMA, AS WELL AS A MEMBER OF THE OKLAHOMA ACADEMY, A GROUP OF BUSINESS AND GOVERNMENT AND EDUCATION LEADERS, THAT FOCUS ON THE BIG ISSUES FACING OUR STATE.  DR. MICKEY HEPNER, THANKS FOR JOINING US HERE IN THE STUDIO.

MICKEY HEPNER:  THANK YOU FOR HAVING ME.

ROB:  YOU KNOW I WANT TO START OFF WITH THAT WHILE YOU MAY DISAGREE ON THE STATE INCOME TAX, THERE IS SEVERAL AREAS THAT THESE TWO GROUPS DO AGREE ON.

HEPNER:  ABSOLUTELY; IN FACT OF THE THIRTEEN RECOMMENDATIONS MADE BY THE GOVERNOR’S TASK FORCE THERE WAS GENERAL AGREEMENT ON TWELVE OF THE THRITEEN INCLUDING ITEMS LIKE THE NEED TO ENHANCE OKLAHOMA’S IMAGE, THE NEED TO IMPROVE OUR RAIL SYSTEM SO WE CAN GET OUR PRODUCTS TO MANUFACTURERS AND TO CONSUMERS, THE NEED TO HAVE A CAPITAL FUND WHERE WE CAN INVEST AND PROVIDE FUNDING FOR START UP BUSINESSES, THE NEED TO FULLY FUND THE CLOSING FUND, AND THE NEED TO IMPROVE OKLAHOMA’S EDUCATION AND WORKFORCE SYSTEMS.

ROB:  NOW THERE SEEMS TO BE QUITE THE DRUM BEAT GOING ON DOWN AT THE STATE CAPITOL TO REDUCE OUR STATE INCOME TAX.  WHY THE RELUCTANCE ON THE PART OF THE STATE ACADEMY?

HEPNER:  THE MAIN PROBLEM THAT ECONOMISTS AND THE ECONOMIC RESEARCH SHOWS WITH ELIMINATING THE INCOME TAX IS THAT HOW DO YOU REPLACE THE LOST REVENUES?  BECAUSE ONE OF THE THINGS WITHIN THE OKLAHOMA ACADEMY THAT WE RECOGNIZE IS THE IMPORTANCE OF GOVERNMENT SERVICES TO HELP AN ECONOMY GROW.  WE HAVE TO HAVE THOSE GOVERNMENT SERVICES TO PROVIDE THE EDUCATION, THE HEALTHCARE, THE ROADS AND EVEN THE PRISONS THAT WE NEED TO MAKE OUR STREETS SAFE.  ALL THOSE THINGS HELP ENHANCE THE QUALITY OF LIFE AND IMPROVE THE STATE’S ECONOMIC DEVELOPMENT.  AND SO WHEN YOU CUT THE INCOME TAX, HOW DO YOU REPLACE THE FUNDING TO PROVIDE THOSE NEEDED GOVERNMENT SERVICES?   AND THAT’S REALLY THE MAIN SOURCE OF CONCERN THAT PEOPLE AT THE OKLAHOMA ACADEMY TOWNHALL HAD WHENEVER WE DISCUSSED THE IDEA OF ELIMINATING THE STATE’S INCOME TAX.

ROB:  DOES IT ESSENTIALLY COME DOWN TO, WHEN YOU’RE TALKING ABOUT STATE SERVICES, YOU GET WHAT YOU PAY FOR?

HEPNER:  ABSOLUTELY!  I MEAN YOU CAN’T GET THE EDUCATION SYSTEM THAT OUR CHILDREN DESERVE.  YOU CAN’T GET THE HEALTHCARE SYSTEM THAT OUR SENIORS RELY UPON.  YOU CAN’T GET THE ROADS THAT OUR BUSINESSES NEED TO GET THEIR PRODUCTS TO CONSUMERS.  AND YOU CAN’T GET THE PRISONS AND THE CRIMINAL JUSTICE SYSTEM TO KEEP OUR STREETS SAFE UNLESS YOU PAY FOR THOSE THINGS.  THEY’RE ALL COSTLY, TO PAY THE SALARIES AND MATERIALS.  AND SO IF WE WANT THOSE GOVERNMENT SERVICES, IF WE VALUE THOSE GOVERNMENT SERVICES, IF WE THINK THOSE ARE TRULY IMPORTANT, THEN WE HAVE TO BE WILLING TO PAY FOR THEM TOO.

ROB:  AND IT ALMOST IS THE ARGUMENT THAT YOU HAVE TO INVEST TO GAIN.

HEPNER:  ABSOLUTELY, IN FACT THE ECONOMIC RESEARCH IS REALLY CLEAR ON THIS ISSUE.  WHENEVER YOU INVEST IN EDUCATION TO ENHANCE YOUR WORKFORCE, SELF-PREPARE THEM WITH THE SKILLS THEY NEED FOR A SUCCESSFUL TWENTY-FIRST CENTURY ECONOMY, THAT HELPS BOOST THE STATE’S ECONOMY.  IN FACT THE SIMILAR RESEARCH ON THE TOPIC SHOWS THAT IF YOU RAISE STATE TAXES AND USE THOSE FUNDS TO MAKE THOSE KINDS OF INVESTMENTS IN THE STATE, THE STATE ECONOMY ACTUALLY GROWS FASTER.

ROB:  NOW MANY OF THE STATE LAWMAKERS THAT FAVOR REDUCING OR COMPLETELY ELIMINATING THE STATE INCOME TAX  SAY BY DOING SO, WE WILL SPUR ECONOMIC GROWTH.  DOES THE DATA HOLD THAT OUT FROM WHAT YOU’VE LOOKED AT?

HEPNER:  ABSOLUTELY NOT.  IN FACT I THINK THAT’S PROBABLY THE BIGGEST SOURCE OF CONFUSION ABOUT ELIMINATING THE INCOME TAX AND WHY I OFTEN REFER TO IT THE MYTH OF THE BENEFITS OF ELIMINATING THE INCOME TAX.  THIS IDEA THAT IF WE ELIMINATE THE INCOME TAX WE’LL SUDDENLY GROW FASTER AND WE’LL BE MUCH BETTER OFF.  NEVADA DOESN’T HAVE A PERSONAL INCOME TAX AND THEY HAVE THE HIGHEST UNEMPLOYMENT RATE IN THE NATION.  TENNESSEE AND FLORIDA HAVE STRUGGLED MIGHTILY OVER THE LAST FEW YEARS AND THEY HAVE NO PERSONAL INCOME TAX.  IN FACT ONE OF THE THINGS WE LOOKED AT IS THE OKLAHOMA ECONOMY WITH OUR PERSONAL INCOME TAX IS STILL FARING PRETTY WELL.  IN FACT OUR STATE ECONOMY, ON A PER CAPITA BASIS, IS GROWING OVER THE LAST TEN YEARS AT THE FIFTEENTH FASTEST PACE IN THE NATION, FASTER THAN SIX OF THE NINE STATES THAT LACK A PERSONAL INCOME TAX.  OUR PER CAPITA PERSONAL INCOME IS GROWING AT THE ELEVENTH FASTEST PACE IN THE NATION, FASTER THAN SIX OF THE NINE STATES THAT LACK A PERSONAL INCOME TAX.  AND OUR IMMEDIATE HOUSEHOLD INCOME IS GROWING AT THE FOURTH FASTEST PACE IN THE NATION, FASTER THAN ALL NINE STATES THAT LACK A PERSONAL INCOME TAX.  AND FOR SOME REASON IN OKLAHOMA, WE HAVE THIS STRONG DESIRE TO ALWAYS BEAT TEXAS AND TO COMPARE OURSELVES TO TEXAS AND WANT TO DO BETTER THAN THEM, IN A LOT OF THINGS.  AND SOME OF THIS DRIVE TO ELIMINATE THE INCOME TAX IS FOR US TO TRY TO BE MORE LIKE TEXAS AND ADOPT A TEXAS SYSTEM, SO WE CAN GROW LIKE THEY ARE, BUT THE DATA SHOWS THAT WE ARE ACTUALLY BEATING TEXAS.  IN ALL THREE OF THOSE METRICS THAT I MENTIONED TO YOU, WE ARE FAR OUTPACING TEXAS RIGHT NOW, AND SO IT’S CERTAINLY NOT TRUE THAT TEXAS IS FARING BETTER THAN WE ARE.  IT’S CERTAINLY NOT TRUE THAT US BEING MORE LIKE THEM WOULD MAKE US BETTER OFF, BECAUSE IN ALL THOSE CASES, WE’RE ACTUALLY OUT PERFORMING TEXAS.  AND SO THE QUESTION I ASK IS, INSTEAD OF US TRYING TO BE MORE LIKE TEXAS, MAYBE TEXAS SHOULD BE LOOKING TO BE MORE LIKE US.

ROB:  NOW THIS ALMOST SOUNDS LIKE THAT THIS IS JUST THE CONTINUANCE OF THE ONGOING ACADEMIC DEBATE ABOUT SUPPLY SIDE ECONOMICS THAT BY LESSENING THE TAX BURDEN ON THE TOP THE MONEY, YOU KNOW, TRICKLES DOWN.  ARE WE IN A ECONOMIC SITUATION NOW IN OUR STATE WHERE OUR ECONOMY IS DOING BETTER THAT IT ALLOWS US TO MAYBE EXPERIMENT WITH THIS?

HEPNER:  UH, UH, NO!  WE’RE REALLY NOT IN THAT KIND OF A PLACE YET.  WE STILL HAVE EDUCATION FUNDING THAT IS AMONG THE LOWEST IN THE NATION.  AND SO IT’S NOT A SURPRISE THAT OUR EDUCATIONAL OUTCOMES ARE AMONG THE LOWEST IN THE NATION.  AND IF WE THINK ABOUT HOW DO WE BEST PREPARE OUR WORKFORCE FOR A TWENTY-FIRST CENTURY ECONOMY; HOW DO WE BEST PREPARE THEM TO SUCCEED AND EXCELL IN THAT KIND OF ENVIRONMENT.  IT’S CERTAINLY NOT GOING TO BE BY US RANKING FORTY-NINTH IN EDUCATIONAL OUTCOMES.  AND SO WE AREN’T IN A POSITION YET WHERE WE CAN TAKE A GAMBLE ON THIS KIND OF THING.  AND I WILL SAY THAT ON THIS POINT, THE DEBATE ABOUT ELIMINATING THE INCOME TAX AND ITS BENEFITS ON A STATE ECONOMY IS LESS OF AN ACADEMIC DEBATE THAN IT IS A POLITICAL DEBATE.  I, ALONG WITH TWO OTHER STATE ECONOMISTS WERE CALLED TO TESTIFY BEFORE THE LEGISLATIVE TASK FORCE ON COMPREHENSIVE TAX REFORM, AND ALL THREE OF US RECOMMENDED AGAINST ELIMINATING THE PERSONAL INCOME TAX.

ROB:  WELL IT CERTAINLY WILL BE AN INTERESTING DEBATE IN THE COMING MONTHS AND ONE THAT WILL PROBABLY AFFECT EVERY ONE OF OUR LIVES.  THANK YOU SO MUCH FOR BEING HERE.

HEPNER:  THANK YOU.