Conservative group to scale back income tax attack in Oklahoma

BY MICHAEL MCNUTT Published: October 25, 2012

Dzurisin said her group will continue to support reducing the personal income tax rate and other ways to update the tax code to lower the burden to taxpayers.

“We would totally be in support of a tax cut,” she said. “We need tax reform to be competitive with other states.

“We're in the midst of a region that is very competitive when it comes to the tax code,” Dzurisin said. “We just saw Kansas implement the largest tax cut in state history and Texas beneath us has no income tax, so whatever we can do to make our tax code more competitive with those other states in terms of attracting businesses and jobs to Oklahoma we should be looking at that and do it.”

The five income tax-cutting bills considered by lawmakers didn't call for increasing another state tax or tapping another source of revenue to replace the lost revenue.

Personal income taxes bring in about 30 percent of the money legislators appropriate, or about $2 billion of this fiscal year's $6.8 billion budget. That amount doesn't include nearly $800 million of personal income tax revenue that goes to transportation, education and teacher retirement funds before the tax collections go into the general revenue fund, the state's main operating fund.

The Oklahoma Council of Public Affairs plan originally called for reducing the top personal income tax rate to 2.25 percent and continuing to reduce it by 0.25 percentage points a year until the tax was eliminated in 10 years.

Fallin's plan called for cutting the rate to 3.5 percent and reducing the number of brackets in the personal income tax code from seven to three. It called for couples making up to $30,000 a year to pay nothing in state income taxes and those making $30,000 to $70,000 a year having a personal income tax rate of 2.25 percent.

Both proposals called for the money to be made up through spending cuts to state agencies and operations and cutting deductions, exemptions and economic tax credits. Both anticipated increased sales tax revenues and other economic activity coming to the state because of the lower income tax rate.

Blatt said the personal income tax rate isn't a major factor in recruiting businesses. Cutting taxes won't produce a strong economy, he said.

Legislators have been discussing pay for state employees, who have gone six years without an across-the-board pay increase. Some proponents of cutting the personal income tax rate say a pay increase could be approved this year along with a scaled-back plan to cut the income tax.