The "Oklahoma Tax Reduction and Simplification Act," the tax cut plan outlined by Governor Mary Fallin in her State of the State address, was heard today in the House Appropriations Committee where it passed by a margin of 11-6. The bill is sponsored by House Speaker Kris Steele and Senate President Pro Tempore Brian Bingman. The bill now heads to the House floor before it can make its way to the Senate.
"The Oklahoma Tax Reduction and Simplification Act is a game-changer for the state," Fallin said. "This reform measure will provide immediate tax relief to a large majority of Oklahoma families while delivering a far more attractive tax climate for businesses deciding where to locate. By passing this legislation, we'll be leaving more money in the pockets of working Oklahomans while helping to attract new and better jobs. This will deliver the boldest, most significant tax reduction in state history, and I commend the Legislature for moving forward today with this bill."
In addition to cutting taxes, the Oklahoma Tax Reduction and Simplification Act replaces Oklahoma's complicated seven bracket income tax structure, which taxes the first penny that every Oklahoman makes, with three new lower, flatter and simpler rates (see tax chart below). These tax cuts would go into effect on January 1, 2013.
After 2013, the Oklahoma Tax Reduction and Simplification Act proposes further reductions by cutting the remaining income tax an additional quarter point in every year where the state of Oklahoma hits a revenue growth trigger of 5%, eventually eliminating the income tax for every Oklahoman.
Both House Speaker Steele and President Pro Tem Bingman reiterated their support for income tax reductions.
"The Legislature is fully committed to a growth-spurring, responsible income tax reduction and I am pleased the governor's plan is moving forward," said Steele. "The governor has a bold vision and we're committed to working with her to achieve our common goal of building a more prosperous Oklahoma."
"The people of Oklahoma are hungry for real, meaningful tax reform, and we have every intention of coming through for them," said Bingman. "Governor Fallin has given us a great starting point as we discuss the various income tax reduction proposals in the legislature. While we have a long road ahead to craft a final bill, I am proud to stand with her as we fight for lower taxes and less government. Cutting the income tax, and focusing what we do spend on core services like teaching in the classroom, fixing our broken roads, and fighting crime in our communities, is a recipe for jobs and prosperity that Oklahomans deserve."
The Oklahoma Tax Reduction and Simplification Act was included as part of a balanced Executive Budget submitted by Governor Fallin at the beginning of the legislative session. It has a fiscal year impact of $131,984,000 in FY 2013, with a full fiscal year impact of $329,960,000 in subsequent years, according to the Oklahoma Tax Commission.
Fallin said the plan, which cuts approximately $992 million in income taxes, will be paid for in three ways: eliminating approximately $662 million in tax credits and tax deductions, reducing government spending by cutting waste, and utilizing growth revenue that occurs as the result of pro-growth policies. The state also currently has $47.2 million more in available revenue for FY 2013 than was originally predicted.
"Our current tax system is based on outdated income brackets and littered with carve-outs and loopholes," Fallin said. "By eliminating these loopholes, we can lower taxes and create a simpler and fairer tax system. That alone will help to reduce government bureaucracy. The Oklahoma Tax Commission predicts that it will save $300,000 simply from processing fewer and less complicated tax returns."
"Moving forward, we need to continue to eliminate government waste and reduce the size of government. Many of our agencies can continue to identify ways to operate more efficiently and effectively. Finding those savings is a responsibility we have to our citizens as well as an important step in funding this tax cut plan."