Now is not the time for the Republican-controlled Legislature to wilt in coming up with a significant cut in Oklahoma's personal income tax rate, Gov. Mary Fallin said Thursday.
“Our members in the House and Senate — those who have gone out for years and talked about reducing our income taxes — need to not only talk the talk but walk the walk,” Fallin said. “This is the year.
“We've talked about the need to eliminate our exemptions, our carve outs, our loopholes in the tax code. We know we have revenue growth. We know we're making government smaller and smarter so we're saving taxpayer money. I think there is room to have a tax cut. I'd like to see a significant tax cut that is meaningful to our state.”
Kansas legislators on Wednesday passed a measure that would put their state's top personal income tax lower than Oklahoma's top rate of 5.25 percent. The governor of Kansas, a Republican as is Fallin, is considering signing the measure, which would lower that state's top personal income tax rate from 6.45 percent to 4.9 percent.
“I'm pushing for as much of a decrease in our income taxes as possible,” Fallin said. “That's been one of my big concerns in talking about reducing our income taxes, is that other states around the nation are becoming more competitive by reducing their income tax.
“We need to have a tax reduction this year,” she said. “We need to simplify our tax code. I'm going to keep pushing up until the last minute.”
Lawmakers must approve a budget for the 2013 fiscal year, which begins July 1, by May 25. Deciding whether to cut the personal income tax rate will be a key part of the final $6.6 billion budget package.
House Speaker Kris Steele said Thursday that May 18 is probably the latest a budget agreement could be reached in order to get a required budget bill passed by the May 25 deadline. Steele, R-Shawnee, said he expects an agreement could be reached by the middle of next week.
Fallin has proposed reducing the top rate of the personal income tax to 3.5 percent next year, and suggested further cuts of 0.25 percent a year. The additional cuts would depend on whether the state's tax revenues came in at least 5 percent higher than the previous year.
Another proposal called for cutting the top personal income tax rate to 2.25 percent next year and eliminating the personal income tax in 10 years. That has been changed to lowering the income tax rate to 0.3 percent, with further reductions dependent on the growth of revenue collections.
Some rank and file Republican members said privately that tax-cut discussions are in the range from reducing the top percentage rate by 0.3 percent to 4.95 percent or a half percent to 4.75 percent. Others said they are unsure whether the state, after three years of cutting most state agency budgets because of the recession, should cut the income rate now and suggested a tax cut for next year take effect only if certain revenue conditions were met.
“I'm pushing as hard as I can to get them to do it this year, not to delay and not to wait,” Fallin said.
“Many of them have campaigns this year and I know the people of Oklahoma are going to be watching to see if they deliver.”
House Democrats have said they are against a cut in the personal income tax rate, which provides about a third of the state's tax revenues. Senate Democrats have said they would not support any bond proposal if the personal income tax rate is cut.
Steele said lawmakers have about $265 million more to appropriate this year compared with a year ago.
“We believe that a portion of that should go back to the taxpayers in reducing our personal income tax rate,” Steele said. “We also believe that some of it ought to go for targeted services that we believe are core to the state of Oklahoma.”
Core services are education, transportation, public safety, and health and human services, he said.