Revenue is the money collected by governments. Without revenue, governments cannot provide services we expect. Revenue decisions, then, often come down to how much leaders want to spend on government services and how much residents are willing to pay. If they can agree on those most basic questions, they still must address other revenue issues, like who should pay for services and on what basis.
This section summarizes Oklahoma state and local government revenues. Since taxes are such an important and visible source of revenue, they get the most attention here. The primer assesses what makes an effective tax system and then describes Oklahoma’s tax system, including how it has developed over time and how each of the nine major taxes we pay works. Taxes, though, are not the only source of revenue, so the primer also describes the user fees and federal grants that are needed to fully fund needed government services.
This section includes several important conclusions about Oklahoma government revenues.
- State government collected nearly $19 billion from all revenue sources in 2008, while local governments collected over $12 billion.
- Taxes are the largest source of revenue–$8 billion for the state in 2008 and $4 billion for local governments–but they still make up less than half of all government revenue. Federal funds, user charges, utilities, and insurance trust revenues make important contributions to funding government services.
- Oklahoma’s revenue system is very centralized. State government collects a higher percentage of taxes and of all revenues than the average state.
- Sales taxes are the largest tax source for Oklahoma governments, followed by the individual income tax. Together these account for more than one-half of Oklahoma tax revenue. Over the last two decades we have become more dependent on these two taxes.
- In 2008 Oklahomans paid $992 less in taxes per person than the national average. Most individual taxes are below average as well. Property taxes are among the lowest in the nation.
- Oklahoma taxes have been consistent at about $10 for every $100 earned for the past two decades. In the same time period, however, the national average has grown, so Oklahoma’s taxes have become comparatively lower than other states.
- Oklahoma collects less per person than the national average from all revenue sources except federal funds, where we are near the average.
- User charge collections help pay for services that benefit some citizens and businesses more than others. Higher education tuition, charges by state and local hospitals, and local charges for sewerage and solid waste are the largest sources.
- Federal funds are essential to maintaining basic public services. More than one-third of federal funds are for health and social services. Education and transportation funding from Washington also helps the state and local governments fund many services.
- For Oklahoma’s local governments, intergovernmental revenue from the state and federal government is the largest source of funding, followed by user charges and property taxes.