Oklahoma Governor Mary Fallin today urged state legislators to quickly approve an income tax cut, citing the need to remain competitive with Kansas, the state's neighbor to the north. Earlier today Kansas Governor Sam Brownback signed into law a tax cut bill to reduce Kansas' top income tax bracket to 4.9 percent.
Oklahoma's top income tax bracket remains at 5.25 percent, although Governor Fallin and state legislative leaders have agreed to a tax cut deal to lower the top income bracket. Under the new plan, Oklahoma would experience an income tax reduction in two-stages, eventually seeing its top bracket reduced to 4.5 percent. The plan would first lower the rate to 4.8 percent in Fiscal Year 2013 before lowering that rate further to 4.5 percent in 2015, provided the state's tax revenues grow by 5 percent.
"The Legislature is currently considering an income tax cut plan that will save Oklahoma taxpayers over $218 million in its first full year of implementation," said Fallin. "That's money that will help to create jobs, spur economic growth and provide relief to working families. It will also help small business owners, many of whom file as individuals, by lowering their taxes and greatly simplifying the tax code. Tax relief is an important part of Oklahoma's formula for sustained economic success, and it's important for lawmakers to pass that plan quickly and send it to my desk."
Fallin said that a tax cut was necessary for Oklahoma to succeed in a competitive economic environment.
"Businesses, employers and families have a choice when deciding where to locate. One of the most important factors they consider is the income tax. Currently, Oklahoma is sandwiched between Texas, which has no income tax, and Kansas, which has just taken steps to lower their rate below Oklahoma's. Both of these states are lead by conservative governors and legislators who are serious about job creation and delivering the most pro-business and pro-growth environment they can. Oklahoma needs to compete with our neighbors; to do that, we need to lower our income tax."
More information on the tax cut deal agreed to by Governor Fallin and Oklahoma's legislative leaders is below:
* The proposal lowers the top income tax rate from 5.25 percent to 4.5 percent in Fiscal Year 2015, provided the state meets a one-time revenue growth trigger of 5 percent. It first reduces the top rate to 4.8 percent in FY 2013 regardless of revenue growth.
* The joint proposal represents a tax cut of over $218 million to Oklahomans when fully implemented in FY 2014, and would cut taxes by an additional $121.4 million in FY 2015 should the growth trigger be reached. Lost revenue is partially offset by tax reforms totaling $117 million when fully implemented in FY 2014. These reforms include the elimination of 33 tax credits, the elimination of certain deductions and the elimination of the personal exemption for single filers making over $35,000 and joint filers making over $70,000 (see attached one pager for new details).
* The new plan also simplifies the tax code by dropping the total number of tax brackets from seven to three. New rates will initially be set at 1 percent, 3.3 percent and 4.8 percent (4.5 percent in FY 2015, with the revenue growth trigger).