Legislation to responsibly phase out Oklahoma’s personal income tax over 10 years and spark long-term economic and job growth in the state cleared its first major hurdle this week.
House Bill 3038, which is authored by a coalition of lawmakers making up nearly a fourth of the entire state House of Representatives, was approved Monday in a bipartisan vote of the House Appropriations and Budget Subcommittee on Revenue and Taxation.
The measure would repeal Oklahoma’s progressive personal income tax without necessitating increases in other tax rates or cuts in funding to core government services.
“Our goal is to make Oklahoma the best state in the nation for business and job growth,” said state Rep. Leslie Osborn, a Mustang Republican who is one of 23 primary authors of HB 3038. “We can achieve this goal by allowing each and every Oklahoman the ability to keep more of the fruits of their labor, which gives them greater incentive to pursue prosperity for themselves and their family.”
HB 3038 would phase out the state personal income tax through a process of simplifying the tax code, making modest reductions in wasteful, inefficient and non-essential state spending at the outset of the phase-out process, and utilizing growth revenue from other sources as Oklahoma’s private sector grows in response to the state’s dramatically improved tax climate.
Were Oklahoma to eliminate its personal income tax without raising or expanding any other tax rates, the state would have the lowest overall tax burden in the continental United States.
“We want to place Oklahoma on a course of sustained, robust prosperity and job growth that will bear real fruit in the short term and continue well into the future for our kids and grandkids,” said state Rep. Josh Cockroft, a Tecumseh Republican who is another principal author of HB 3038. “Even though many of the policy reforms in Oklahoma over the last decade have put us on better economic footing, we’re not content to just be better than some other states. We have the potential to be the best state in America for business and jobs, and we need to take that transformational step.”
Supporters of HB 3038 maintain that lower tax rates have historically proven to have a positive impact on work, output and employment. The result has been higher levels of economic growth, job creation and state revenue growth, on average, in low-tax states.
“We have the opportunity to make Oklahoma a magnet for business creation, relocation and expansion,” said state Rep. Elise Hall, an Oklahoma City Republican and sponsor of HB 3038. “Experience from tax cuts at the national level, in other states, and even here in Oklahoma has shown that lower tax burdens lead to increased prosperity and greater individual economic freedom.”
As a Feb 7 editorial in the Wall Street Journal pointed out, a state’s tax burden “is a major signal about how a state treats business, investment and risk-taking.”
The editorial went on to state, in reference to efforts to repeal personal income taxes in Oklahoma, Kansas and Missouri, that, “The tax competition in America’s heartland is an encouraging sign that at least some U.S. politicians understand that they can’t take prosperity for granted. It must be nurtured with good policy, as they compete for jobs and investment with other states and the rest of the world.”