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. 

Rates	Single Brackets	Marriage Brackets
1%	0 to 2,500	0 to 5,000
3.30%	2,501 to 7,500	5,001 to 15,000
4.80%	7,501 and over	15,001 and over

PERSONAL INCOME TAX REFORM

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.

TAX CREDITS ELIMINATED

TAX CREDITS ELIMINATED

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.”