DALLAS – The Republican majority in the Oklahoma House provided easy passage Tuesday to a bill lowering the state’s top income tax rate to 5% as Republican Gov. Mary Fallin proposed at the 2013 session opening.

House Bill 2032, sponsored by Speaker T.W. Shannon, was approved 65-30, with four Republicans and 26 Democrats opposed.

Fallin included the reduction from the current 5.25% tax rate in her 2013 legislative package after her proposals for a top rate as low as 3.25% failed in the 2012 session. The measure died in conference committee when lawmakers could not resolve disputes over the size and timing of a lower rate.

The House-backed measure now will be considered by the Senate, which on Monday passed its own bill to cut the rate to 4.75%. A third proposal still in the House calls for a top tax rate of 4.99%.

The rate cut in the Senate version is linked to the elimination of more than 30 current tax exemptions and exceptions. The House bill does not include similar provisions, but Rep. Scott Martin, R-Norman, said the state would see higher revenues due to increased economic activity spurred by the lower tax rate.

“This bill is proposing to cut the tax rate to increase tax revenues,” he said. “A fairer and lower tax burden encourages all growth.”

An analysis of the 5% rate by the Oklahoma Tax Commission estimates it would reduce revenues from the income tax by $130 million in fiscal 2015.

The personal income tax is expected to generate $2.2 billion in fiscal 2014 in the official revenue estimate adopted last month by the Board of Equalization. The proposed 5% rate would go into effect Jan. 1, 2014.

No taxpayers would pay more under the revised schedule, Martin said, and 62% would see a reduction in their tax bill, with an average benefit of $76 a year per person.

Minority leader Rep. Scott Inman of Del City contended that the average annual benefit would be $39 per person, with 42% of filers seeing no reduction.

That is not enough to stimulate the economy into providing additional revenue promised by proponents of the lower rate, he said. Increased state aid to local education would help the economy more , Inman said. “If you think giving families back $7 a month, $77 a year, somehow is going to change their buying habits to make this economic engine run, you’re fooling yourself,” Inman said.

The 4.75% top rate in the Senate plan would reduce income tax revenues by $250 million in fiscal 2015 while protecting vital state services, said Sen. Rick Brinkley, R-Owasso, one of the sponsors of Senate Bill 585.

The bill targets obsolete tax credits that are no longer beneficial, he said.

“These reforms mean we can lower income taxes and improve education funding, creating an environment that will help us attract new businesses, new jobs, and raise personal income,” Brinkley said.

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