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Why a state grocery tax cut causes concern for Oklahoma's local government leaders

A sign that reads "Shopping in Stillwater paid for this project" stands in the grass next to an active reconstruction project on 7th street, across the road from city hall, Feb. 28, in Stillwater, Oklahoma.
Lionel Ramos/OPMX
A sign that reads "Shopping in Stillwater paid for this project" stands in the grass next to an active reconstruction project on 7th street, across the road from city hall, Feb. 28, in Stillwater, Oklahoma.

There’s a sign that Stillwater Mayor Will Joyce points to when telling the story of a full-street reconstruction project right across from city hall.

“Shopping in Stillwater paid for this project.”

Joyce, over the sound of the gravel sliding off the back of the truck, said workers are taking the street all the way down to the surface level and completely replacing a section of the road.

This maintenance, he says, comes at a price.

The road improvement a block away from his office is one of more than a dozen other similar projects planned across Stillwater and will cost $1.2 million when it’s completed. So far, in total, the construction is estimated to cost about $34 million.

And there’s only one way to pay for it.

“Without us collecting sales tax at stores in Stillwater, we would not have the funding that goes to pay for these projects,” Joyce said.

The issue is top-of-mind for Joyce because Gov. Kevin Stitt recently signed House Bill 1955 into law. It reduces the 4.5% sales tax the state has on groceries to zero percent, but it also restricts Oklahoma cities from raising their sales taxes on groceries for a year starting in August.

That’s a problem Joyce and other mayors around the state will wrestle with because Oklahoma lawdictates cities and towns can’t have varying tax rates for different types of items or services. So, a restriction to raising the sales tax on groceries is also a restriction to raising all of their sales taxes.

The way the tax system is set up in the state, our local public safety, our local transportation, the streets that you drive on, the community that you live in, is funded by sales tax. It just is,” he said.

Local governments rely on sales taxes, Oklahomans need inflation relief

Joyce says he’s all for the state eliminating its sales tax on groceries, but not at the cost of cities and towns losing the freedom to choose what’s best for their communities. Pausing local governments’ ability to manage their main revenue source could mean vital city projects across Oklahoma being delayed or canceled.

Per the Oklahoma Constitution, cities like Stillwater depend on sales tax revenue to fix roads, update water systems, and build fire and police stations.

But, paying more sales taxes means paying higher prices. And Oklahomans are already suffering. The cost of everything from groceries to transportation to housing has risen in Oklahoma every year since 2020, according to a recent report by the Oklahoma Department of Commerce.

And that means politicians like Governor Kevin Stitt are pushing to relieve that financial strain. Stitt pushed the agenda at this year’s State of the State Address.

“You've heard me say year after year, we don't need more taxes. We need more taxpayers,” he said during his annual speech to a joint session of the legislature and Oklahomans across the state.

Stitt says more taxpayers come after lower taxes. But that idea doesn’t make sense to everyone.

Shiloh Kantz is the director of the center-left think tank the Oklahoma Policy Institute, a nonprofit that does policy research and advocacy across the state. She said cutting taxes indiscriminately is too expensive for the state.

We are not smart cutting revenue,” Kantz said, pointing out the more than $380 million Oklahoma Tax Commission officials estimated the grocery tax cut would cost the government in annual revenue.

Kantz also said House Bill 1955 is too confusing for Oklahomans because their sales taxes won’t fully go away.

“When someone goes to buy groceries, and they still have to pay city and county taxes, they're going to think the legislature is full of liars,” she said.

A constitutional problem

House Speaker Charles McCall is the original author of the measure, first introduced last year. He says the bill is meant to provide relief to Oklahomans and protect them from the local sales tax hikes that would surprise them.

“We know over time that there's going to be pressure at the local levels, at the city levels, that they might want to come in and raise their taxes, which completely nullifies what the state did to provide the relief,” McCall said.

Joyce doesn’t buy that argument.

It's laughable because every single sales tax increase in a municipality in the state of Oklahoma is voted on by the people of the city,” he said. “It never would have happened.”

He said if lawmakers really want to provide relief to all Oklahomans they would reform the tax system to allow cities across the state to diversify their revenue sources and keep the burden on taxpayers low.

“You're talking about constitutional provisions, he said. “It is a massive undertaking.”

And, he said, it’s also the crux of the problem.

“It's a whole lot easier to tell people, in an election year especially, ‘hey, we’re just going to give you a couple hundred dollars back,’ Instead of doing the really difficult work of explaining to people that we need comprehensive tax reform in this state,” Joyce said.

Lionel Ramos covers state government for a consortium of Oklahoma’s public radio stations. He is a graduate of Texas State University in San Marcos with a degree in English. He has covered race and equity, unemployment, housing, and veterans' issues.
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StateImpact Oklahoma reports on education, health, environment, and the intersection of government and everyday Oklahomans. It's a reporting project and collaboration of KGOU, KOSU, KWGS and KCCU, with broadcasts heard on NPR Member stations.
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