Republicans lose chance to cut Oklahoma's personal income tax

Steele, R-Shawnee, said he realized in late February that plans to cut the top personal income tax rate of 5.25 percent by more than 1 percent next year was in serious trouble when a House subcommittee rejected a measure that would have outlawed transferable tax credits, which would have saved the state nearly $30 million a year.

“The political will was just not there to reform the tax code, meaning the various incentives and credits and programs that are in place to help spur economic activity,” he said.

The strong negative reaction by senior citizens and military veterans upset about the possible loss of their income tax deductions and exemptions also played a part, and House Democrats held weekly news conferences for a month chipping away at the various Republican proposals.

“Our goal was to demonstrate to the citizens of Oklahoma not only how bad the tax cut plan would be for those who would see their taxes raised, but also how bad it would be for those core functions of government that those citizens really rely on day to day,” said House Minority Leader Scott Inman, D-Del City. “It's a major defeat for the governor and Republican leadership of one of their top legislative agenda items for the year.”

When the session started in February, it seemed inevitable that the personal income tax cut would be reduced. Republicans had a two-thirds majority in both the Senate and House of Representatives and a Republican in the governor's office.

Gov. Mary Fallin made national headlines when she kicked off the session announcing a bold plan to reduce the top personal income tax rate to 3.5 percent and gradually eliminating it.

Republican lawmakers announced two plans to lower the tax rate to 2.25 percent; both also called for gradually eliminating the tax. But for their plans to succeed, it was necessary for the elimination of most tax credits and deductions to help make up for the lost revenue. The personal income tax brings in about 30 percent of the revenue that lawmakers appropriate; it's estimated to bring in about $2 billion of this fiscal year's $6.6 billion budget.

A couple of weeks later, senior citizens and veterans launched a campaign at lawmakers and the governor's office, complaining about the proposed loss of their deductions and exemptions. Both groups had their exemptions and deductions restored in the proposals.