Democrats raise alarm over cutting Oklahoma taxes amid D.C. budgetary uncertainty

OKLAHOMA CITY – Some are questioning the wisdom of Oklahoma Republicans’ plans to cut taxes amid the ongoing push for budgetary reform in the nation’s Capitol that aims to shift the cost for some high-dollar federal programs onto states.

Some critics of the plan to cut Oklahoma’s income tax 0.25% said the state will likely need the revenue the existing tax generates if congressional Republicans move forward with plans to require states to bear some costs of programs such as Medicaid and Supplemental Nutrition Assistance Program, more commonly known as SNAP or food stamps. Experts also point to broader economic concerns that the Trump administration’s tariffs could increase the costs for goods and reduce consumer spending, resulting in less sales tax revenue.

But a top legislative Republican said he is not concerned about the budgetary uncertainty playing out in D.C.

Republicans said that now is the right time to cut the state’s top income tax rate from 4.75% to 4.5%, which will allow Oklahomans to keep more of their money. They said will grow spending and increase Oklahoma’s competitiveness in luring new residents to the state.

Gov. Kevin Stitt said the state’s income tax used to be 7% and has been gradually reduced.

“And every time we’ve seen that, the economy continues to expand,” Stitt said. “We’ve seen revenue continue to grow.”

A family of four with an income of $50,000 would save about $137 a year, according to Senate staff.

The Oklahoma Policy Institute, a Tulsa-based think tank, said a 0.25% cut will cost state coffers about $338 million annually.

Lawmakers are also discussing reducing the number of income tax brackets to three from six. The organization estimates that it will cost an additional $87 million a year.

“It is not wise at all,” said Aanahita Ervin, the organization’s fiscal policy analyst, of making tax cuts this year. “The (federal) costs are going to impact every state.”

Oklahoma Democratic lawmakers are also sounding the alarm, though being in the minority they can do little on their own to stop a tax cut.

Under the most current plan, congressional Republicans are hoping to reduce Medicaid spending by about $625 billion, and require states for the first time to contribute to SNAP

In Oklahoma, nearly 1 in 4 residents are on Medicaid, and about 17% of people receive food stamps.

Senate Minority Leader Julia Kirt, D-Oklahoma City, said state leaders don’t have enough certainty from Congress to cut taxes right now.

“We won’t know the federal budget until after session, so we are making decisions in a vacuum,” she said.

Even without tax cuts, Oklahoma would still struggle to cover any federal cost shifts, she said.

Kirt said the federal government has sent states billions in pandemic relief dollars. That has propped up budgets, not prudent planning, she said.

But Senate President Pro Tem Lonnie Paxton, R-Tuttle, who supports the cut, said he isn’t worried about the federal uncertainty.

“I don’t think it is going to impact this budget year,” Paxton said. “If anything happens, it will be down the road and give us time to plan for it.”

Republicans say the state has about $3.5 billion in savings.

House Minority Leader Cyndi Munson, D-Oklahoma City, said Oklahoma voters a few years ago approved Medicaid expansion and enshrined it in the state Constitution, so the legislators must pay for it even if the federal government does not, she said.

“There is a lot of uncertainty with what’s happening at the federal level,” she said.

Ervin, with the Policy Institute, said it will be difficult for Oklahoma lawmakers to raise taxes if revenue is needed in the future.

In 1992, voters passed State Question 640 that required a three-fourths vote in both chambers or a vote of the people to raise taxes, something which has only been done once in three decades.

Ervin said lawmakers’ first instinct would be to cut services and or rely on savings before raising taxes.

“I think they will exhaust all those options before they even come close to talking about raising taxes,” Ervin said.

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