OKLAHOMA CITY (January 20, 2011) – A coalition of state lawmakers announced today they have filed legislation to phase out Oklahoma’s personal income tax in such a way that the state would have the lowest overall tax burden in the continental United States.
The lawmakers said their proposal, while still a work in progress, would phase out the personal income tax in a responsible manner over 10 years and would not necessitate raising other tax rates or cutting funding to core services currently provided by state government.
“Our goal is to transform Oklahoma into the best place to do business, the best place to live, find a quality job, raise a family and retire in all of the United States. Not just better than average, but the very best,” said Rep. Leslie Osborn, one of 23 members of the state House of Representatives who have signed on as principal authors of House Bill 3038. “In the past decade, Oklahoma has made great leaps toward becoming a more prosperous state with a more vibrant economy,” Osborn said. “Now, we should take the final steps to guarantee that people can keep more of the fruits of their labor in Oklahoma than they can anywhere else.”
The coalition of 23 House members — which equates to over one-fifth of that legislative body — consists of representatives, both rural and urban, from all four quadrants of the state.
While Oklahoma has moved up in recent years from being one of the poorest states in the nation to now beating the national average in many economic indicators, the authors of the bill believe it is important to continue lowering Oklahoma’s tax burden.
“The personal income tax is still our biggest dis-incentive in Oklahoma to work and produce at a higher level, to relocate a company to Oklahoma or start up a new one here, to create jobs, to pursue a better job, and to save and invest,” said Rep. Tom Newell, another author of the bill.
“These are the things that drive a state’s economy. When we remove the barriers preventing people from engaging in these kinds of activities, we empower individual Oklahomans of all income levels to pursue a new level of prosperity for themselves and their families, which leads to increased prosperity for our state as a whole.”
Without the state personal income tax, the average Oklahoma family of four would save over $1,300 a year, and the average individual filer would save nearly $1,000 annually.
“That’s a pretty decent pay raise for most Oklahomans,” said Rep. Charles Ortega, also a principal author of the legislation. “That extra income will give Oklahomans greater economic freedom, and our improved business climate and improved job market here in Oklahoma will give them a better shot at achieving the American dream.”
The proposal would not require raising or expanding any other existing tax rates, such as property or sales taxes, nor would it require introducing any new forms of taxation.
Should the state personal income tax be phased out in this manner, Oklahoma would have the lowest overall tax burden in the continental United States. Of the 50 states, only Alaska would have a lower tax burden.
“We shouldn't raise a tax to cut a tax,” said Rep. Jason Murphey, another of the bill’s sponsors.
“A rising tide lifts all boats. When the government has the courage to use tax reform to allow its residents to keep their money, that money will be used to provide jobs and economic activity. This expands the tax base and makes even more tax reform possible.”
Oklahoma already has a low cost of living compared to most states. By pairing this attribute with the lowest overall tax burden of the lower 48 states and other pro-growth reforms made by Oklahoma policymakers in recent years, the state would have one of the best economic climates in the nation, sponsors said.
Current efforts in Kansas, Missouri and elsewhere to eliminate personal income taxes in those states may serve as additional motivation for Oklahoma to do the same.
“Now is the time for Oklahomans to take a bold, transformational step toward increased prosperity and greater opportunity,” said Rep. David Derby, another author of the legislation.
“By making Oklahoma a no-income-tax state, we will have put together a winning recipe for business investment, new job opportunities and economic growth in Oklahoma.”
By phasing out the personal income tax over a full 10 years, state government entities would be given ample time to make adjustments, and growth revenue from other revenue sources would support core state services such as education, transportation, public safety, and the safety net for the truly needy.
As the phase-out took effect, the increased economic activity within Oklahoma’s borders would result in a broadening of the tax base and increased tax collections overall.
"In the past decade, states without a personal income tax outpaced Oklahoma in economic growth and job creation," said Rep. David Brumbaugh, himself a principal author on the bill. "Those states also doubled Oklahoma’s rate of state and local tax revenue growth. Basically, as those states attracted productive individuals, those individuals gave more to state and local governments through sales and property taxes and the like."
Rep. Harold Wright, also a member of the coalition sponsoring the bill, said, "Even though this bill is still a work in progress, I think all of us are united in our desire to find a way to responsibly phase out Oklahoma's income tax.
"For many of us, lowering the tax burden for our fellow Oklahomans was one of the key issues that inspired us to run for office in the first place. We know the benefits for our state will be significant and that we can achieve our goal and still maintain the core services Oklahomans utilize every day."
The 23 initial primary authors of HB 3038 are, in alphabetical order:
Rep. Don Armes, Faxon
Rep. Gus Blackwell, Goodwell
Rep. David Brumbaugh, Broken Arrow
Rep. Josh Cockroft, Tecumseh
Rep. Marian Cooksey, Edmond
Rep. Lee Denney, Cushing
Rep. David Derby, Owasso
Rep. George Faught, Muskogee
Rep. Randy Grau, Edmond
Rep. Elise Hall, Oklahoma City
Rep. Corey Holland, Marlow
Rep. Mike Jackson, Enid
Rep. Dan Kirby, Tulsa
Rep. Randy McDaniel, Oklahoma City
Rep. Glen Mulready, Tulsa
Rep. Jason Murphey, Guthrie
Rep. Tom Newell, Seminole
Rep. Charles Ortega, Altus
Rep. Leslie Osborn, Mustang
Rep. Mike Sanders, Kingfisher
Rep. Sue Tibbs, Tulsa
Rep. Steve Vaughan, Ponca City
Rep. Harold Wright, Weatherford