Friday, May 18, 2012

Governor and Senate Leaders Unveil Plans for Tax Cuts and Simplification

Governor Mary Fallin and leaders in both the House and Senate today introduced a joint plan for income tax cuts and tax code simplification. The proposal lowers the top income tax rate from 5.25 percent to 4.8 percent in Fiscal Year 2013 and includes a one-time additional tax cut tied to a revenue growth trigger in FY 2015. If state revenue grows by at least 5 percent in that year, the income tax rate would be reduced further to 4.5 percent.

The joint proposal represents a tax cut of over $218 million to Oklahomans when fully implemented in FY 2014, and would cut taxes by an additional $121.4 million in FY 2015 should the growth trigger be reached. Lost revenue is partially offset by tax reforms totaling $117 million when fully implemented in FY 2014. These reforms include the elimination of 33 tax credits, the elimination of certain deductions and the elimination of the personal exemption for single filers making over $35,000 and joint filers making over $70,000. 

The new plan also simplifies the tax code by dropping the total number of tax brackets from seven to three. New rates will be set at 1 percent, 3.3 percent and 4.8 percent. 

Single Brackets
Marriage Brackets
0 to 2,500
0 to 5,000
2,501 to 7,500
5,001 to 15,000
7,501 and over
15,001 and over

Retain the full personal exemption of $1,000 per dependant on Oklahoma adjusted gross income for individuals making $35,000 or less and joint filers making $70,000 or less; eliminate the exemption for returns with income above those levels

Eliminate the deduction for state income or sales taxes paid included within the federal itemized deductions. Oklahoma is one of only 7 states that allows the deduction of state taxes paid; and
Eliminate the deduction for political contributions.

Recycling and Hazardous Waste
 Manufacturing Gas Consumption
 Energy Conservation Assistance Fund
 Sale of National Historic Landmark
 Employer Child Care Services
 Child Care Center
 Ad Valorem Credit for damaged/destroyed property
 Small Business Guaranty Fee
 Hepatitis A Immunization
 Employer Credit for Wages and Modification for Injured Employees
 Ethanol Facilities
 Biodiesel Facility
 Incentive District Investment
 Poultry Litter Transportation
 Film or Music Projects Investment
 Dry Fire Hydrant or Water Storage
 Specially Trained Canines
 Computer Industry
 Electric Motor Vehicle
 Native American Employment
 OSHA Safety Pays
 Small Business Technology Transfers
 Interest and Dividend Exemption
 Swine and Poultry Producers
 Police Corps Scholarship Program
 Living Organ Donation
 Competitive Livestock Show Award
 Rural Economic Development Loan
 Stafford Loan Origination Fee
 New Computer & Data Processing Employees
 Small Business Incubators – Sponsors
 Small Business Incubators – Tenants
 Oklahoma Capital Investment Board

 “This proposal represents a significant income tax cut and an important step forward for Oklahoma,” Fallin said. “Our plan is a responsible proposal that will go hand in hand with a budget that protects and supports all core functions of government. It also delivers a substantial tax cut that will allow Oklahomans to keep more of their hard-earned money while improving the environment for job recruitment and job retention in the state. I applaud both House and Senate leaders for coming together on this issue and giving the people of Oklahoma some well-deserved tax relief.”

 “Collections through April of this year are now $350 million higher than originally expected,” said House Speaker Kris Steele. “Oklahoma is growing. We have a choice to either spend all that money on more government, or give it back to the hardworking people of Oklahoma. We choose the latter. An income tax cut is not only the smart thing to do for Oklahoma’s economy; it’s the right thing to do for our citizens.”
Senate Pro Tem Brian Bingman said the tax cut would help small business owners while protecting core government services. 

“Today’s tentative agreement gives the people of Oklahoma a real and meaningful tax cut,” said Bingman.  “Senate Republicans have always believed lowering the tax burden is an important part of creating jobs and economic freedom in Oklahoma.  And today, we’ve taken an important step forward that shows the people of Oklahoma they can count on us to keep our word.  This plan will help more of our private sector citizens and small business owners be the innovators, entrepreneurs, and drivers of our state economy—all while protecting important core government services like teaching in the classroom.”

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