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Oklahoma lawmakers reach deal on personal income tax cuts

The plan calls for cutting Oklahoma's top personal income tax rate of 5.25 percent down to 4.8 percent next year.
BY MICHAEL MCNUTT Modified: May 17, 2012 at 10:39 pm •  Published: May 17, 2012

The plan will cost the state $32.7 million in the 2013 fiscal year, which will be paid for with growth revenue from this fiscal year, said Preston Doerflinger, Fallin's secretary of revenue and finance on her Cabinet. Revenue collections through April are $350 million higher than originally expected.

The plan is expected to cost the state $102 million in the 2014 fiscal year, he said.

“This is a straightforward simple approach to reduce taxes in the state of Oklahoma,” Steele said. “This approach won't jeopardize ... funding for core services of state government.”

Core services are transportation, public safety, health and human services and education, he said.

Bingman said coming up with the income tax-cutting plan was a long process.

“We were all for a tax cut, and sometimes you have different ways of getting there,” he said. “But it's all about the art of compromise and negotiations.”

House and Senate Democrats have said it's premature for the state, which is seeing a gradual economic recovery after three years of budget cuts to most agencies, to lower the income tax.

Weeks of meetings

Leaders from the Republican-controlled Legislature, along with Fallin's budget advisers, have been holding closed-door meetings the past two weeks to discuss lowering the income tax. Fallin has been imploring lawmakers in recent days to at least get the top rate of 5.25 percent below 4.9 percent after Kansas legislators approved a measure lowering that state's top personal income tax rate from 6.45 percent to 4.9 percent.

Efforts are under way in Missouri to eliminate its income tax. Texas doesn't have a personal income tax.

Senate Republicans proposed earlier this week reducing the top personal income rate of 5.25 percent by 0.25 percentage point each of the next two years. It would lower it to 5 percent next year and 4.75 percent in 2014.

House Republicans wanted to lower the rate to 4.95 percent next year. Fallin had said she would have liked to cut it to about 4.75 percent next year.

Fallin proposed at the start of this session a personal income tax-cutting plan that reduced the top rate of 5.25 percent to 3.5 percent next year and reduced the brackets from seven to three. She also proposed gradually eliminating the income tax by an additional 0.25 percentage point in any year in which the state saw 5 percent revenue growth.

Two bills, which had the backing of more than 35 lawmakers, called for cutting the income tax rate to 2.25 percent next year and gradually reducing the rate by 0.25 percentage point until it was eliminated in 10 years. Other proposals called for cutting the income tax 0.25 percentage point each of the next two years.

The deepest cuts became unrealistic when legislators refused to eliminate or reduce corporate tax credits, which were part of the formula of how the state would make up for lost revenue. Personal income tax brings in about 30 percent of funds appropriated by lawmakers.