Fallin made national headlines in February when she kicked off the legislative session by urging lawmakers to approve her plan to make bold cuts in the personal income tax. She suggested reducing the top rate down to 3.5 percent and gradually eliminating it. Her plan also called for reducing the number of tax brackets and getting rid of various tax credits.
Republicans filed six other measures, ranging from reducing the personal income tax a half percentage point over the next two years to as much as 3 percentage points next year and eliminating the tax in 10 years.
The income tax-cutting plans were doomed largely when lawmakers failed this year to cut corporate tax credits. Their elimination was necessary to make up for lost revenue with the reduced personal income tax rate. Personal income taxes bring in about 30 percent of the money that lawmakers appropriate.
Outlawing tax credits
A task force that met during the summer recommended getting rid of various tax credits, including transferable tax credits. But a House of Representatives subcommittee in February rejected a measure that would have outlawed transferable tax credits, which would have saved the state nearly $30 million a year.
House Democrats waged a campaign throughout the session against the income tax-cutting proposals.
“We're happy that over the course of the past four months we beat the drum telling the folks of Oklahoma that the tax cut plans that the governor and Republican leadership had offered would decrease services and actually increase taxes on hardworking families while giving a few special breaks,” said Minority Leader Scott Inman, D-Del City. “Finally enough legislators listened.
“It is no doubt a difficult time for the governor since this was one of her top priorities,” he said.