OKLAHOMA CITY —
The Oklahoma House gave final legislative approval Wednesday to a bill that would slash the state’s income tax rate to 5 percent in 2015 and provide $120 million for improvements to the state Capitol, both top priorities of Republican Gov. Mary Fallin.
The Republican-controlled House voted 65-35, mostly along party lines, to send the bill to Fallin, who is expected to sign it. It would cut the state’s top income tax rate from 5.25 percent to 5 percent beginning Jan. 1, 2015, with a second cut to 4.85 percent set for 2016 if state revenues continue to rise.
Cutting the income tax rate has been a top priority for Fallin, who says a tax cut will help improve Oklahoma’s economy and make the state more attractive to businesses and industries.
“Lowering the income tax rate will let Oklahoma families keep more of their hard-earned money while spurring job growth and business expansion in Oklahoma,” Fallin said in a statement. “My thanks go out to the Legislature for their work on this important issue.”
But Democrats argued the tax cut was irresponsible and would dramatically reduce funding for critical state services such as public education, health care and programs for the poor.
House Democratic Leader Scott Inman questioned the wisdom of approving an income tax cut for 2015 or 2016 when it’s possible that state revenues could plummet before then.
“Even if we fall off a cliff by $1 billion, we’re still going to cut $120 million?” said Inman, D-Del City. “Explain to me how that is fiscally responsible.”
The initial drop in the top rate to 5 percent is expected to have a fiscal impact of about $136 million annually when fully implemented, while the second reduction to 4.85 percent would bring the overall annual cost to $237 million, according to state finance officials.
The savings on the average Oklahoma tax return would be about $82 at 5 percent, and $143 at 4.85 percent, according to the Oklahoma Tax Commission.