Following passionate debate, the Oklahoma House of Representatives approved a bill Thursday to cut the state’s top individual income tax rate by 0.25 percent and the corporate income tax rate by 1 percent.
“This legislation strikes the balance between lowering the tax burden on families and businesses and ensuring core government functions are funded,” House Speaker Jeff Hickman said after the measure passed 57-34.
The personal income tax rate would be reduced from 5.25 percent to 5 percent and the corporate income tax rate would go from 6 percent to 5 percent if the bill were to become law.
The planned cuts would be contingent on personal income tax revenues and corporate income tax revenues experiencing enough revenue growth to offset the amount of revenue loss due to the cuts. The earliest the reductions could take effect would be 2016.
The state Senate previously passed its own income tax cut bill, so negotiators from the two chambers will now meet to see if they can agree on a version that can pass both houses and be presented to the governor for final approval.
Most House Republicans voted for the House bill presented Thursday, while all 28 Democrats who were present voted against it.
Democrats repeatedly stood up to argue that lawmakers should spend money on improving state services and facilities rather than passing a tax cut.
“This is a piece of the Capitol that we have failed to fix over the last three years,” said state Rep. Richard Morrissette, D-Oklahoma City, as he waved around a piece of broken and corroded pipe taken from the Capitol’s plumbing system.
“We have convenience store clerks that are making more than corrections officials,” added state Rep. Joe Dorman, D-Rush Springs.
State Rep. James Lockhart, D-Heavener, said the proposed tax cut would only mean about $8 a month to the average Oklahoma working family, which he said wasn’t even enough to pay for the breakfast he had Thursday morning.
House Republicans countered by arguing that a tax cut would lead to economic growth and that state agencies will always contend they have unmet economic needs.
“Between 1995 and 2010, the nine states with no personal income tax gained $146 billion in working wealth,” said state Rep. Jason Nelson, R-Oklahoma City. “The nine states with the highest per capita personal income tax lost $107 billion.”
“There’s never enough money to feed the machine,” said state Rep. Earl Sears, the House author of House Bill 2508. “Federal government, state government, your local government — they never can get enough money... I think sometimes we literally have forgotten that what funds this place is the hard working people in this state.”
The personal income tax cut is projected to cost the state about $147 million in revenue over a full year, while the corporate income tax cut is projected to cost the state about $53 million a year, Sears said. Those amounts would have to be offset by growth revenues for the tax cuts to take place.
The individual and corporate income tax cuts would be independent of each other, so either cut could take place sooner than the other if it were to experience faster revenue growth, Hickman said.
The Senate previously passed its own income tax cut bill earlier that had a different trigger for the initial 0.25 percent income tax cut and called for a second-tiered cut of 0.15 percent if tax revenues continued to improve sufficiently. The Senate measure does not include a corporate income tax cut.
House and Senate negotiators will now get together and see if they can agree on a tax cut measure that both bodies will approve.
“Both tax cuts have triggers in them — the Senate version and ours,” Hickman said. “Ours now addresses the corporate income tax as well. So, they’re a little bit different and obviously we’re going to have to iron out those differences at some point.
“The Senate is sending us a two-step income tax reduction and we now sent them an income tax reduction and a corporate income tax reduction, which a lot of people argue is just as important, maybe more so, in terms of economic development.”
“We’ll look at their plan and I’m sure they’ll look at ours and we’ll see where we end up at the end of the year, but I would be surprised if we don’t get a tax cut on the governor’s desk this session that’s similar to one or the other,” Hickman said.
“This is an ongoing process,” said Sears, R-Bartlesville. “Ours is a little bit different than the Senate’s. There’s no question that the Senate and the House will come together and we will review, discuss, negotiate and at the end of the day, I hope we come out with an income tax reduction that both chambers agree upon that’s the best way to proceed forward.”