Governor Mary Fallin and leaders in both the House and Senate today introduced a joint plan for income tax cuts and tax code simplification. The proposal lowers the top income tax rate from 5.25 percent to 4.8 percent in Fiscal Year 2013 and includes a one-time additional tax cut tied to a revenue growth trigger in FY 2015. If state revenue grows by at least 5 percent in that year, the income tax rate would be reduced further to 4.5 percent.
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 be set at 1 percent, 3.3 percent and 4.8 percent.
"This proposal represents a significant income tax cut and an important step forward for Oklahoma," Fallin said. "Our plan is a responsible proposal that will go hand in hand with a budget that protects and supports all core functions of government. It also delivers a substantial tax cut that will allow Oklahomans to keep more of their hard-earned money while improving the environment for job recruitment and job retention in the state. I applaud both House and Senate leaders for coming together on this issue and giving the people of Oklahoma some well-deserved tax relief."
House Speaker Kris Steele also spoke in support of the plan.
"Collections through April of this year are now $350 million higher than originally expected," said Steele. "Oklahoma is growing. We have a choice to either spend all that money on more government, or give it back to the hardworking people of Oklahoma. We choose the latter. An income tax cut is not only the smart thing to do for Oklahoma's economy, it's the right thing to do for our citizens."
Senate Pro Tem Brian Bingman said the tax cut would help small business owners while protecting core government services.
"Today's tentative agreement gives the people of Oklahoma a real and meaningful tax cut," said Bingman. "Senate Republicans have always believed lowering the tax burden is an important part of creating jobs and economic freedom in Oklahoma. And today, we've taken an important step forward that shows the people of Oklahoma they can count on us to keep our word. This plan will help more of our private sector citizens and small business owners be the innovators, entrepreneurs, and drivers of our state economy--all while protecting important core government services like teaching in the classroom."