The “Oklahoma Tax Reduction and Simplification Act,” the state income tax cut plan outlined by Governor Mary Fallin in her State of the State address, this afternoon (Wednesday, February 29) cleared the House Appropriations and Budget Committee.
The proposal passed with 11 Republican votes in favor. Opposing the measure were five Democrats and one Republican.
The measure, House Bill 3061, 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.
A&B Chairman Earl Sears of Bartlesville promised both supporters and opponents of the measure in its current form that the measure was headed “to a room where we’re going to be looking at all the tax plans.”
Gov. Fallin applauded the panel’s action, saying, “The Oklahoma Tax Reduction and Simplification Act is a game-changer for the state. 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 seven bracket income tax structure, which taxes the first penny that every Oklahoman makes, with three new rates characterized by Fallin’s staff as “lower, flatter and simpler.” Those 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 percent, eventually eliminating the income tax for every Oklahoman.
Some analysts say the trigger would mean a 20-to-30 year glide path before the income tax levy is entirely eliminated.
Both House Speaker Steele of Shawnee and President Pro Tem Bingman of Sapulpa 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 committee rejected two proposed amendments. One from state Rep. Joe Dorman, a Rush Springs Democrat, would have stressed that if taxes rose on any Oklahoman as a result of the law’s passage, the provisions of State Question 640 would be enforced. (The measure requires either a three-fourths majority of the Legislature or popular approval of any tax increase.)
Speaker Steele, presenting the bill before the A&B panel, said the Dorman proposal was unnecessary because the constitutional provisions of S.Q. 640 would not be repealed. The committee tabled Dorman’s motion 12-5.
A second proposed amendment from state Rep. Don Armes, a Faxon Republican, would have retained a Wind Power tax credit so long as turbines are, as Armes put it, “in the air and producing power.”
Steele said he had discussed the issue with Armes but that the amendment was unnecessary, contending “this is very much a work in progress and all possible changes will still be considered.” Armes’ amendment was tabled on a 9-8 vote, with some Republicans joining the panel’s Democrats in opposition of the tabling motion from Speaker Steele.
In debate on the bill, Democratic state Rep. Mike Brown of Tahlequah argued passionately but briefly that “our tax system is not broken in Oklahoma.” Speaker Steele responded, saying he hoped members would support the bill to keep open the dialogue on all income tax reform measures under consideration.
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.”
In other action, the House A&B Committee advanced House Bill 3038, by state Rep. Leslie Osborn of Tuttle, on an 11-4 vote, with no Republican opposition and four Democrats against the measure.
Editor’s Note: Editor Patrick B. McGuigan contributed to this report.