Gov. Mary Fallin signed a bill into law that will cut Oklahoma’s top income tax rate by 0.25 percent. The bill was authored by District 47 State Rep. Leslie Osborn.
The state House of Representatives approved the measure last week by a vote of 54-40.
Senate Bill 1246 will reduce the personal income tax rate from 5.25 to 5 percent in Fiscal Year 2016 if state revenue projections are greater than projections in December 2014.
If growth continues, then a second reduction will occur lowering the rate from 5 to 4.85 percent no earlier than two years after the 5 percent rate is enacted if enough funds are available to cover the cost of the reduction.
Osborn, who is the House author of the bill, said she has pushed tax cuts bills each year she has been in the state Legislature, but to no avail.
"We have never gotten a tax cut through since I have been there," Osborn said. "I fully expect the governor to sign it this week because she has been looking for a tax cut bill to get to her desk for years. It was a good day when we passed it."
Osborn said she isn’t sure why it took so long to get a tax measure approved, but adds the wait was worth it.
"I am really not sure why it took six years," Osborn said.
"There are a lot of people that believe that when you cut taxes that it automatically means less revenue will come in the next year. The real numbers are the last seven times we cut income taxes in the state, which was under a Democratic governor, all seven times more money came in the next year. Our state has seen economic growth and record revenues due to our competitive income tax policies and pro-business environment. This measure allows Oklahomans greater control over their hard-earned money. They will either spend or invest those dollars and further strengthen our economy."
House Speaker Jeff Hickman, R-Fairview, concurred.
"This measure provides a responsible means to lower the tax burden on our citizens while making sure there is sufficient revenue growth to fund core government services," Hickman said. "While Washington, D.C. looks to increase taxes and stifle job growth, Oklahomans will know that their Legislature is reducing the penalties for working families and ensuring they keep more of their money."
Osborn said the earliest the new tax cut could take place is the 2016 tax year. The measure contains a second conditional tax cut provision that calls for a subsequent cut in the top income tax rate to 4.85 percent as quickly as the state’s revenue growth is enough to offset the amount that would otherwise be lost due to the additional tax cut.
The Oklahoma Tax Commission estimates that if the cuts are fully implemented by 2018, income tax revenue will be cut by almost $200 million a year.
House Minority Leader Scott Inman, R-Del City, said the tax cut measure is fiscally irresponsible.
"This tax cut is fiscally irresponsible," Inman said. "We simply cannot meet our essential obligations while continuously eroding our tax base."
Rep. Eric Proctor, D- Tulsa said 40 percent of all Oklahoma taxpayers "won’t receive anything" from the tax reduction in SB 1246. He said most of the remaining Oklahoma households will get only about $30 per family, but the top 1 percent of the taxpayers will reap $2,031.
Rep. Mike Brown, D-Tahlequah said Oklahoma is already a low-tax state.
According to the Oklahoma Policy Institute, Oklahoma’s per-person tax burden is 26 percent less than the national average. And research data from the Tax Foundation show that Oklahoma’s per capita state and local tax collections are among the lowest in the seven-state region bordering this state.
"Apparently we’re on a race to the bottom," Brown said.
Rep. Earl Sears, R-Bartlesville, serves as the vice-chair of the House Appropriations and Budget Committee. He said history shows that when Oklahoma has cut taxes the state’s economy has grown.
"Oklahoma is booming with economic growth," Sears said. "If we are to compete with our neighboring states, we need to have a competitive income tax rate to attract and retain a skilled workforce to fill the quality jobs that are being created in our state."
Osborn said once the tax cuts are implemented, the economic numbers will speak for itself.
"The point of lowering taxes is that it is an economy driver, it keeps Oklahoma going," Osborn said.
"I believe the numbers don’t lie. I think those who opposed the tax cuts will be pleasantly surprised when they do see the tax cuts take effect it will do exactly what it did the last seven times."