Oklahoma's governor and legislative leaders announced an agreement Wednesday on a $12.6 billion fiscal 2026 budget that includes an income tax cut.
The deal on a spending plan for the fiscal year that begins July 1 calls for reducing the top individual income tax bracket to 4.5% from 4.75% and eliminating the three lowest tax brackets, according to Republican Gov. Kevin Stitt, who has been pushing for the gradual elimination of the tax, which raised $3.3 billion in fiscal 2024.
"We talked about getting a tax cut done, giving some relief to Oklahomans, staying up with the competition and what other states around us are doing so we can be the most pro-business friendly state and get [tax rates] on a path to zero," he told reporters.
Stitt estimated the tax reduction's cost at $160 million in fiscal 2026 and said negotiations are ongoing over an automatic trigger for further tax cuts when state revenue grows.
"They don't have the final language yet, but that'll be a very reasonable method," he added.
The state
The budget agreement keeps appropriations flat for most state agencies, according to Stitt, who said the state is monitoring potential big federal cuts to Medicaid.
"If they cut something, a reimbursement rate and rate in Medicaid, I think they would give us plenty of time to adjust, and they would give us more flexibility," Stitt said.
Oklahoma is one of three states with a constitutional amendment requiring Medicaid coverage for low-income adults,
Republican House Speaker Kyle Hilbert pegged budget reserves at $3.5 billion.
Ample reserves have helped boost Oklahoma's bond ratings.
The state's issuer rating was
The Republican-controlled legislature is scheduled to wrap up its session on May 30.
