Oklahoma governor calls special session on tax cut

Oklahoma Gov. Kevin Stitt is bringing lawmakers back into a special session on a tax cut after his plan to phase out income taxes failed to pass during a session last fall.

The session, set to begin Jan. 29, will take up a 0.25% personal income tax reduction. 

"With record-breaking savings and a strong economic outlook, there's not time like the present to deliver a pay raise to all Oklahomans," Stitt, a Republican, said Tuesday in a statement, pointing to $5.4 billion in reserves. "Let's get this across the finish line before we head into regular session."

Bloomberg News

Republican Senate President Pro Tempore Greg Treat called holding a special session the week before the regular session begins Feb. 5 "a needless waste of taxpayer money."

"I outlined to the governor, we will not know how much money the state will have to spend on a tax cut until the Board of Equalization meets to certify budget numbers in mid-February," he said in a statement, adding he doesn't know "what will be different between the last week in January and the last time he pulled this stunt in October."

The proposed tax cut comes amid a trend of declining state revenues, both nationally and in Oklahoma.

Oklahoma's gross tax receipts in calendar 2023 were down 2.8% year-over-year, according to a report from the Office of the State Treasurer.

A special legislative session in October called by Stitt to phase out income taxes was cut short when the Senate adjourned without taking any action.

Democrats also pushed back against the special session. 

"To undertake statewide, comprehensive tax reform in five days, without committee work and public vetting and input, would serve no other purpose than to place politics over policy," Senate Democratic Leader Kay Floyd said in a statement.

Republican House Speaker Charles McCall, who introduced bills this session to phase out the corporate income tax over five years and decrease personal income tax rates, said his chamber "will be ready to pass meaningful tax relief legislation for the hardworking people of Oklahoma as we previously have in multiple special and regular sessions."

Income tax revenue may be impacted by a case before the Oklahoma Supreme Court that could determine whether Native Americans who live and work on reservations should pay state income taxes. Oral arguments were scheduled for Wednesday.

Last year, the state received positive outlooks on its AA rating from S&P Global Ratings and Aa2 rating from Moody's Investors Service. The outlook revisions from stable cited among other factors Oklahoma's reserves, which position the state to weather future volatile swings in revenue.

Moody's said a rating upgrade could result if the state maintains strong reserves, continues economic diversification beyond the oil and gas sector, and improves its financial flexibility, transparency, and stability.