Oklahoma income tax cut bill clears first hurdle, sets stage for future reductions

OKLAHOMA CITY – The Oklahoma House on Tuesday advanced a measure to lower the state’s income tax despite concerns it would have little impact on residents.

House Bill 2764 creates a process for ultimately eliminating the state’s income tax when revenues hit certain triggers.

The measure would initially reduce the state’s top income tax to 4.5% from 4.75%.

It would also collapse the six income tax brackets into three.

Rep. Mark Lepak, R-Claremore, said the measure has safeguards to compensate for economic downturns. A tax cut would not occur if a revenue failure is declared, he said.

It would take nearly 20 years before the income tax could be eliminated, Lepak said.

Tax collections for the past 20 years on average grew at 4%, even when taxes were reduced, he said.

A 0.25% cut would cost state coffers about $340 million, Lepak said.

“While it will have a small amount of savings for those in poverty, it is not sufficient enough to really have an impact on their circumstances,” said Rep. Michelle McCane, D-Tulsa.

Rep. Ellen Pogemiller, D-Oklahoma City, questioned the timing of the cuts. Proposed federal changes to Medicaid could cost the state $841 million, she said. Congress is considering proposals that could require states to pick up more of the cost.

Cutting taxes is an effort to check a “political box” when there has been no substantial evidence that people want it, Pogemiller said.

“I think people would rather have daycare,” she said. “I think people would rather have health care. I think people would rather have good roads.”

Cutting the income tax by 0.25% equates to a Starbucks coffee a month for his constituents, said Rep. Andy Fugate, D-Oklahoma City.

“Maybe if you add it up over a year, it’ll let them buy a couple dozen eggs,” Fugate said.

The state expects to have $3.5 billion in surplus, said House Speaker Kyle Hilbert, R-Bristow.

“You reach a point as a state where you have so much surplus, you start to ask is it time we restore some of that back to the taxpayers to let them keep a little bit more of their hard earned money,” Hilbert said.

He said the bill was responsible.

It sets up a mechanism where an additional tax cut is only triggered if revenue projections are met plus more than what the tax cut would cost in terms of lost revenue to the state, Hilbert said.

Even if the triggers are met, the Legislature could still put a tax cut on hold, Hilbert said.

The measure passed by a vote of 74-19 and heads to the Senate for consideration.

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