Two Reports Detail Low Savings Rate, Higher Tax Burden for Poor Oklahomans
Two new reports are out this week about Oklahomans and their money: one (read it here) is about how many people save their money and to what extent, and the other (read it here) is about who pays the biggest percentage of their money in taxes.
Forty-four percent is one of the striking statistics included in the 2013 Assets & Opportunity Score Card. That is, 44 percent of Oklahoma residents have little to no emergency savings.
To get more specific, that 44 percent represents what’s called the liquid asset poverty rate. It’s a measure of how much people have in the way of cash or interest-earning assets like savings accounts or 401(k)s.
It turns out that more than two in five people in Oklahoma don’t have enough of those types of assets to survive—even just at the poverty level—for more than three months in the event of a crisis, like loss of a job, or a medical emergency.
That number doesn’t come as a surprise to Mary Thomas at the Credit Counseling Centers of Oklahoma.
“With the economy people are just existing now,” Thomas said. “They’re just trying to pay a mortgage, pay rent, groceries, utilities, transportation.”
“The average person does not have a written spending plan in place,” she said, “so they don’t know where the money’s going or why … or where they need to make adjustments.”
The problem, she says, is overspending.
“In America, we want things yesterday,” she said.
The Credit Counseling Center is a United Way agency that provides money management education and credit counseling. Thomas recognizes that saving can be more of a challenge to those with lower incomes.
That’s reflected in the scorecard data: Oklahomans who live below the poverty line make up the greatest part of that 44 percent. But the goal of the center is to show even those with low incomes that they can probably save at least some of what they’re spending.
“A lot of people don’t realize that I’m going to a convenience store every day, buying coffee or soda, sandwiches, pastries,” she said, “and we don’t realize that we’re spending six dollars a day for those things. If you multiply six times five, that’s 30, and 30 times four is $120. That’s some savings right there.”
Efforts at the Credit Counseling Centers are focused on personal responsibility when it comes to finance. But another study out this week points to a challenge that most Oklahomans can’t control: tax rates.
The income tax structure in Oklahoma is technically progressive—meaning the highest earners pay the highest tax rates.
But the Institute on Taxation and Economic Policy finds that in Oklahoma, not to mention most states, if you look take all forms of taxation, not just income, then the system actually looks regressive—meaning the lowest earners pay the largest percentage of their income in taxes.
Gene Perry with the Oklahoma Policy Institute explains, “the biggest contributor to that is sales tax.”
He says, everyone pays the same rate of sales tax, so “families who are making less spend a larger portion of what they make on necessities.”
“They’re spending it all, pretty much,” he said, “on groceries, on their rent, on the very basic things they need to get by.”
“They’re not saving,” he added, “so they’re pretty much paying sales tax on all of their income.”
In Oklahoma, the lowest 20 percent of earners pay 10 percent of their incomes in taxes. The top one percent of earners pay a little less than five percent of their income in taxes.
“The tax system is upside down,” Perry concludes from this data. “It shouldn’t be taking the most from the people who can afford it least.”
The Oklahoma Policy Institute is advocating for a change to the tax system that would relieve the sales tax burden on the poorest Oklahomans and shift revenue collection toward the more wealthy. But much of the recent discussion of tax policy at the state capitol has focused on cutting income tax.
Governor Fallin is expected to propose a revised plan to cut income tax in her upcoming state of the state address. The effect of such a measure on the poorest Oklahomans, and their ability to save money, will likely be a major topic of discussion in the approaching legislative session.