The state question that proposes raising Oklahoma’s sales tax one percent to pay for $5,000 raises for teachers could cause issues for city governments that also rely on sales taxes to pay for streets, fire stations, and other municipal projects.
Two University of Oklahoma economists – Cynthia Rogers and Gregory Burge – looked to past sales tax increases to see how municipalities were affected. They analyzed the impact of four previous Oklahoma state sales tax increases (in 1984, 1984, 1987 and 1990) on the timing of municipal sales tax rate changes.
“Smaller cities were less likely to increase their sales taxes in the two years following these state increases,” Rogers said. “The implications suggest that passing SQ 779 may extend the time between sales tax increases in small communities from 9 to 16 years.”
But she said larger, urban districts that serve as retail centers — like Tulsa, Oklahoma City, and Norman — did not have that problem and were able to raise local sales taxes after the state rate went up. So she doesn’t think things like Oklahoma City MAPS project will be impacted, and that people will continue to support it.
Rogers admits she does not know where the threshold lies.
If State Question 779 passes, Oklahoma’s sales tax will be among the highest in the nation, and will top 10 percent in some communities. Voters will decide the issue in November.