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Oklahoma's income tax cut proposals have Republicans battling themselves

Republicans in the state Senate favor a personal income tax cut to take effect in 2015, while House Republicans and Oklahoma's GOP governor prefer a cut to take place next year.
BY MICHAEL MCNUTT mmcnutt@opubco.com Published: April 8, 2013
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“This is simply not the year to cut the income tax,” Inman said. “We need to invest in our core functions of government.”

Senate Minority Leader Sean Burrage, D-Claremore, said the numbers behind rate decrease could be troubling.

“Senate Republican leadership says that the average Oklahoman could save $80 a year with this tax cut,” Burrage said. “That's just $1.50 per week. But, when you add it all up, it means millions of dollars that could be used to restore funding cuts to our local schools, give our teachers or our Highway Patrol a raise, fix our roads and bridges, and restore our state Capitol, which is literally crumbling around us as we debate these bills.”

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.

His measure, 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.

Shannon said a House budget subcommittee rejected Mazzei's bill because it would have raised taxes on some taxpayers.

‘Tax relief now'

Shannon said House Republicans favor a tax cut taking effect Jan. 1.

“We need to provide tax relief now, not delay it another year,” he said. “I know the Senate is committed to working together on this and I'm confident between the governor's office and Pro Tem Bingman we'll have a really comprehensive tax cut bill.”

Asked if the Senate would insist on a tax cut not taking effect until 2015, Bingman said, “We're trying to look at various ways to make sure we can pay for it and being responsible when we look at tax cuts.”

Proponents of a personal income tax cut fear the rejection of both bills this year could derail efforts to get a personal income tax cut for the second year in a row. Five bills were considered last year; lobbyists contested them to protect tax credits identified as targets for elimination.

The Senate in the last days of the session came up with an alternative plan, but it ran in trouble when it was determined some middle-class families would have to pay more in income taxes. The House came up with another plan that the Senate didn't like. The session ended with the Senate not taking up the House bill and the House not hearing the Senate plan.

Input from lobbyists?

If an agreement can be reached on when an income-tax cut should take effect, HB 2032 still faces being opposed by lobbyists working for companies affected by the legislation. It 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. Instead, they would be allowed to get a refund of 80 cents on the dollar 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, usually insurance companies, or individuals, usually for about 80 cents on the dollar. The buyers use the credits to reduce their own tax bills.

“Any bill as it's currently fashioned may find an uphill battle with the lobbyists out here,” Inman said.