The Oklahoma Supreme Court on Tuesday unanimously tossed out a new state law that established incremental state income tax cuts tied to economic growth.
The legislation, which included provisions creating a fund for Capitol repairs, violates a constitutional prohibition against including more than one subject in a single bill, the court said.
“The bill concerns income tax rate reduction as well as the creation of a fund for repairs to the state Capitol building,” Justice James Winchester wrote. “We … hold the statute unconstitutional as it violates the single subject rule mandated by … the Oklahoma Constitution.”
The bill had been one of the top priority pieces of legislation for Gov. Mary Fallin and Republican legislative leaders. Tuesday, they expressed disappointment at its rejection.
“I am extremely disappointed in the Supreme Court's decision to unravel a plan that would have provided tax relief to Oklahoma families as well as a way of restoring our crumbling Capitol building,” Fallin said. “I will work closely with the Legislature to develop a strategy to move forward.”
‘Blow to ... families'
House Speaker T.W. Shannon, R-Lawton, called the ruling “a huge blow to Oklahoma families who have been expecting tax relief.”
“I'm deeply disappointed the Supreme Court has once again ruled against the interests of those families,” Shannon said. “The good news is, help is on the way. I am prepared to act quickly with legislative leaders and the governor to restore what the Supreme Court has undone.”
The rejected measure, HB 2032, called for reducing Oklahoma's top income tax rate from 5.25 percent to 5 percent on Jan. 1, 2015.
It also set up a mechanism that would have cut the top income tax rate to 4.85 percent in 2016 if total revenue growth in fiscal year 2016, which begins July 1, 2015, equaled or exceeded the fiscal impact of the 0.15 percentage point cut.
The bill also would have created a fund for Capitol building repairs, calling for $60 million to be used for Capitol repairs in fiscal year 2014, which began last July 1, and an additional $60 million to be set aside for repairs in fiscal year 2015.
Backers of the tax cut indicated about 62 percent of the state's 1.6 million tax filers would have received a tax cut if the court had upheld the law. None would have seen an increase.
The average return would have had an $82 tax break at the 5 percent maximum tax rate and a $143 tax break at the 4.85 percent level, but amounts would have varied considerably depending on income, Oklahoma Tax Commission officials have said.
Oklahoma taxpayers with federal adjusted gross incomes of up to $25,999 would have gotten back $8 or less, with some receiving nothing, at the 5 percent maximum tax rate, officials said.
Taxpayers would have needed adjusted gross incomes of $80,000 to $99,999 to get back an average of $108. Those with adjusted gross incomes of $200,000 to $499,999 could have expected savings averaging $371 and those earning $1 million or more would have gotten back an average $1,377.
The tax cut bill was successfully challenged by Jerry Fent, an Oklahoma City attorney who has a long history of challenging legislation that he believes to be unconstitutional.
Justices ruled that HB 2032 violates the constitutional single subject rule that is designed to prevent log rolling — the practice of piggybacking an unpopular law with a popular measure so lawmakers can't approve one without the other.
“Taxation policy and the appropriation of state funds for Capitol improvements are not germane … to a readily apparent common theme and purpose,” Winchester wrote. “A voter could certainly be for one measure and not the other, but forced to approve the entire bill in order to pass the desired legislation. The single subject rule prohibits this unpalatable choice.”
Not everyone was disappointed by Tuesday's court decision.
State Rep Mike Ritze, R-Broken Arrow, said he was “very pleased that the Oklahoma Supreme Court ruled in favor of the state Constitution today, despite the fact that the bill included a tax cut that would have helped all Oklahomans.”
“At the end of the day, it is far more important that Legislators abide by their oath to defend the Constitution as the state Supreme Court has done with this ruling,” said Ritze, who removed his name as a co-author of the bill when the language was added concerning Capitol repairs.
State Rep. Mike Reynolds, R-Oklahoma City, called the ruling “a victory for transparency.”
“I've been disappointed in House leadership constantly attacking the Supreme Court's decisions on the single-subject rule,” he said. “It would have been very easy to pass the tax-cut bill without the leadership's pet project of Capitol improvements.”
“Today all Oklahomans have lost a tax cut — not due to a ruling of the Oklahoma Supreme Court, but due to the refusal of the Legislature to abide by the Constitution,” Reynolds said.