WASHINGTON — The “fiscal cliff” deal supported by most of the Oklahomans in Congress will mean higher income tax rates for only a small percentage of Oklahoma taxpayers, though nearly 2 million workers in the state will have smaller paychecks because of an expiring tax cut that wasn't part of the negotiations.
The deal approved by Congress late Tuesday calls for higher tax rates on individual income above $400,000 and family income above $450,000. Taxpayers with that level of income will also pay a higher rate on capital gains and dividends.
Internal Revenue Service figures available for the 2010 tax year do not provide a breakdown for Oklahoma incomes at those specific thresholds. However, the figures show there were 7,231 Oklahoma households with adjusted gross incomes above $500,000 in 2010. That is out of nearly 1.6 million returns filed in Oklahoma that year.
Most Oklahomans were shielded from higher income tax rates, and thousands of low-income and middle-class families will still be able to claim refundable credits for dependents and college expenses.
But the two-year reduction in the payroll tax — which funds Social Security — was allowed to expire with little fanfare, meaning most wage earners will have less money to spend beginning this week.
The reduction, from 6.2 percent to 4.2 percent, amounted to an annual tax break of $1,000 for a family making $50,000. The average tax cut for 1.9 million Oklahomans was $579, according to the White House. Overall, it was worth $1.1 billion in total tax relief in the state.
Reps. James Lankford, R-Oklahoma City, and Tom Cole, R-Moore, said Wednesday that extending the payroll tax cut was never part of the “fiscal cliff” negotiations about tax policy.
“It was meant to be a stimulus, so neither side contested it because you do have to fund Social Security,” Cole said.