OKLAHOMA CITY —
Gov. Mary Fallin signed a bill into law Monday that cuts Oklahoma’s top income tax rate to 5 percent in 2015 and provides $120 million for improvements to the state Capitol.
A top priority for the first-term Republican governor, the cut to the state’s income tax provides Fallin with a political victory more than two years in the making.
“We want to cut taxes responsibly,” Fallin said in a statement. “No one wants to starve state government of the resources it needs to fund priorities like education. The language of this tax cut bill was crafted in a way to ensure that we have enough growth revenue to pursue a significant tax cut.”
A more far reaching plan unveiled by Fallin last year to deeply slash the income tax and offset much of the lost revenue by eliminating dozens of exemptions and credits fell apart in the waning days of the legislative session.
The new law reduces the state’s top income rate that most Oklahomans pay 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. 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.
The tax cut was opposed by Democrats and some Republicans, many of whom argued it is irresponsible to slash so much revenue from the state budget, especially since it’s impossible to know how the state’s economy will be performing nearly 20 months from now when the tax cut takes effect.