From a political standpoint a gross receipts tax to replace the
state income tax has several advantages. It is little wonder
legislative leaders are looking favorably in its direction in the
currently pending tax reform discussion.
A single, broad-based gross receipts tax could replace a
significant amount of the revenue lost by eliminating the state
income tax, exempting groceries from the sales tax, and changing the
estate tax to make Oklahoma a so-called pick up state.
The Revenue Neutral Tax Reform For Oklahoma (RNTR) final report
was prepared by two OU and three OSU economics professors at the
direction of Senate President Pro Tempore Stratton Taylor. It points
out a 1 percent gross receipts tax would produce $2.04 billion in
state revenues. That comes close to covering doing away with the
income tax and exempting groceries from the sales tax.
Since there are no constitutional amendments needed to enact the
gross receipts tax while getting rid of the income tax and making
the proposed changes in the sales and estate tax, technically the
whole package could be enacted by the Legislature. It's possible but
When it comes down to an issue of this importance there is little
doubt the Legislature will want voters to decide. Why not? Given an
opportunity to choose a tax ostensibly falling in the business
sector, while eliminating the income tax and sales tax on groceries,
it takes no political genius to figure out how they will vote.
Another political advantage is the gross receipts tax is a hidden
levy. It becomes part of the price of a service or commodity.
Consumers are unaware of its existence. They only see what they pay
as the price of the product.
The tax is like a salesman's expense report. There are items in
it that aren't on it.
It is easier to manipulate or raise hidden taxes because
consumers don't knowingly feel the brunt. Income taxes, and property
taxes are all identifiable to the taxpayers because they have to
make a direct effort to pay them.
Even with the sales tax, where the tax is clearly listed
separately from the price of the item, consumers rarely notice.
About the only time they pay attention to it is if they buy large-
ticket items like furniture or major appliances where the tax is a
In Oklahoma the only real levy that passes for a gross receipts
tax is the 7 percent severance tax on minerals, the bulk of which is
oil and gas production.
There is a difference in this particular case.
Oil and gas purchasers, not producers generally determine the
price. The result is the tax is not passed on to the consumer. If a
producer sells his oil for $10 a barrel the 70 cents gross
production tax is not added to that price, but is subtracted from
the proceeds to the producer and paid to the state. There is little
or no opportunity for the producer to charge a higher price for his
oil and gas to cover the tax.
Because of this existing 7 percent tax the report suggests
producers be exempt from the gross receipts tax. It also suggests
Oklahoma's price-based sliding tax scale on oil priced at $17 or
less per barrel be extended. …