Oklahoma Considers Pro-Growth Tax Reform

Last year, Oklahoma legislators voted on a tax reduction package to the state’s personal income tax. The measure passed the legislature and was signed by Governor Fallin. Ultimately, however, Oklahoma’s State Supreme Court struck down the tax cut measure. This is a topic that we have discussed in more detail previously.

Pro-growth tax reform is again being considered in Oklahoma and the new measure, being considered in both houses, is even bolder than the tax cut package from last session. The 2013 tax cut package would have reduced the state’s personal income tax from 5.25 percent to 5 percent starting January 1, 2015. There was also a provision to lower the income tax further to 4.85 percent in 2016 if certain revenue targets were met. The new measure working its way through the legislature in the form of twin bills would gradually phase down the income tax from its current top rate of 5.25 percent to 4 percent by 2018. The phase down schedule would be as follows:

I was wondering how a court struck down a tax cut... after a link in the posted article.... I ACTUALLY like the answer!...

Unfortunately, the tax cut package was ultimately ruled unconstitutional by the Oklahoma Supreme Court. The package included a provision to put aside money for repairs to the State Capitol Building, which violated the state’s single subject rule. The rule, which is law in 41 states, says that each bill can only pertain to a single subject; unlike the behemoth laws that are regularly passed at the federal level.

I find myself taking a strange and somewhat unexpected position on this. I am not in favor of an income tax cut for Oklahoma. The revenue to run the state will have to come from somewhere else because we know that there will be no cuts to spending. Oklahoma already has one of the highest combined tax rates in the country, #37 combined state and sales, CNN Money). Sales taxes are part of that where Oklahoma ranks #5 from the top (Tax Foundation).

Thankfully property tax is not that high for most in the state. That is where the difference will be made up if the income tax is reduced though. It will be worse than Texas though where property tax increases routinely exceed inflation. Texas currently ranks #3 in the nation for the highest property taxes (Taxes About.com). My own property tax here in Texas has doubled in the last 16 years for an average annual rate of increase of almost 4.5%. My earings have not kept up with this and now my property tax bill is higher than my mortgage. This is in spite of annual forays to the appraisal board to keep the appraisal tamped down to something resembling a market value. Why would Oklahoma with reduced income tax and revenue make-ups from property tax be worse than Texas? Because you get the worst of both worlds and high sales taxes. You will be saddled with the income tax Texas wants when things get tight and the growing property tax Texas already has. Total taxes never go down and public spending never restrains itself to inflation or something proportional to population growth and inflation.

The problem with property tax is that it stays the same or grows whether you work or not. If you lose your job you may very well lose your home to taxes. With high property taxes you truly are just renting the property you have bought. On the other hand, with income tax you may be more able to keep what you have built when your income earning years end.

No, no high property taxes for me. I’ve had enough of the “benefit” of no state income tax combined with an existing property tax that can grow at will and one of the highest sales taxes in the nation.

Why does Fallon want this? Who is being helped? I am not a Fallon Fan.

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