INFLATION CRISIS IS VEXING, BUT TAX CUTS CAN HELP
From: Oklahoma Council of Public Affairs
There’s no easy answer for solving the inflation crisis. It is time for policymakers to admit that and to take a humble approach.
Major economic shocks are rarely predicted. When the housing bubble burst in 2008 it caught most of us by surprise (aside from Christian Bale). No one was anticipating a worldwide pandemic in 2020. Russia’s invasion of Ukraine wasn’t a part of the Federal Reserve’s economic outlook beginning in 2022. There is a reason we describe these as economic “shocks”—they shock the system because no one saw them coming.
Oklahoma is no stranger to these types of events. When OPEC refused to cut production in 2015 oil prices continued to fall, declining from more than $100 a barrel to just under $30. This was the primary driver in the budget shortfalls plaguing the state over the next few years.
The point is that as the world economy becomes more intertwined, the more complicated and harder to predict it becomes. This was highlighted at the federal level with officials backpedaling on “transitory inflation.” Egos in D.C. are legendarily large, but Oklahoma lawmakers have a chance to show they’re different.
An economy grows by entrepreneurs taking risks, investors trying to make wise decisions, and consumers deciding how to spend or not spend their money. Targeted tax breaks and short-term rebates are misguided solutions that imply the government is the guiding hand for the economy. Rather than assume that they know best how to run Oklahoma’s economy, politicians should trust that their constituents know what is best for themselves. Broad income tax cuts put dollars back in families’ pockets and allow them to make their own decisions. Trusting in free markets isn’t about trusting an ideology. It’s about believing in people and admitting that we can’t know everything.
More than half a dozen states have already cut taxes this year. The current special legislative session gives Oklahoma a chance to join that group and not get left behind.