A Senate committee gutted Gov. Mary Fallin's personal income tax-cutting proposal Thursday and replaced it with a new plan.
Sen. Mike Mazzei, R-Tulsa, chairman of the Senate Finance Committee, inserted the new language in House Bill 2032 three days after a House budget subcommittee voted down his measure to reduce the personal income tax.
Proponents of a personal income tax cut said the apparent retaliatory action could cause efforts to fizzle just as they did a year ago when lawmakers, after sorting through five income tax-cutting measures, couldn't agree on two compromise bills the last days of the session.
Legislative leaders, however, said they are determined to deliver an income tax cut before the session is scheduled to end in late May. Uncertain is how much HB 2032 will resemble the final version.
“This is a work in progress,” said Senate President Pro Tem Brian Bingman, R-Sapulpa. “This just keeps our discussion going.”
About the changes
The changes call for reducing the top personal income tax rate from 5.25 percent to 4.95 percent, and ending the practice of five popular economic tax credits from being sold to others who need to reduce their income tax liability to the state.
The Republican governor issued a statement urging the GOP legislative leaders to keep working on a tax cut.
“My priority is to have a responsible, meaningful tax reduction package signed into law this year,” Fallin said. “I appreciate the words of support for the principle of tax reduction coming from the Legislature. Now it's time for action. I encourage the Senate and House to come together, negotiate, decide on the details of a tax cut plan and send it to my desk.”
HB 2032 originally called for reducing the top rate to 5 percent. It would have been paid out of existing revenue and would have taken effect Jan. 1.
Mazzei's original bill, Senate Bill 585, would have reduced the state income tax to 4.75 percent; some of its cost would have been offset by eliminating some exemptions and tax credits with the rest coming out of existing revenue. It would have taken effect Jan. 1, 2015.
The bill received criticism because it raised the income tax rate on certain taxpayers.
House Speaker T.W. Shannon, author of HB 2032, didn't seem flustered by the changes, but said it was a travesty that the Senate insisted on delaying the income tax cut until Jan. 1, 2015, a year later than he and Fallin proposed.
“That's a fundamental step in the wrong direction,” said Shannon, R-Lawton. “We need to provide tax relief now, not delay it another year and that would be a travesty at this point.”
Bingman said he expected more changes are likely for the bill, which after being approved 8-2 by the Senate Finance Committee is headed to the Senate and then to the House.
“We intend to have at the end of the year a tax cut for taxpayers in Oklahoma,” he said.
Bingman said the state could better afford the tax cut in the 2016 fiscal year, which begins July 1, 2015. To help the state get through a significant budget shortfall three years ago, oil companies agreed to have the state suspend for two years a rebate program on oil produced through certain more expensive drilling methods. The agreement called for the state to pay back the oil companies over three years; the last of annual $96 million payments to the oil companies would occur in June 2015.
“That revenue would be available and help absorb (the cost),” he said.
HB 2032 calls for eliminating the ability of those receiving economic credits for coal mining, wind power, rehabilitating historic buildings, energy-efficient construction and railroad modernization to sell them. They would be allowed to get a refund of 80 cents on the dollars on the tax credits they couldn't use.
When companies receive more credits than they owe in state taxes, they use the transferability feature, which allows them to sell their surplus credits to other corporations or individuals, usually for about 80 cents on the dollar.
The buyers use the credits to reduce their own tax bills.
This is a work in progress. This just keeps our discussion going.”
Senate President Pro Tem Brian Bingman,