DALLAS — Oklahoma lawmakers have approved five competing measures cutting the state income tax that must be reconciled before the fiscal 2013 budget can be developed.
The House has passed two bills lowering the income tax rate, while the Senate has approved three tax-cutting proposals.
The current top rate for individual filers is 5.25%, but the proposals would reduce the rate by varying amounts until the state income tax eventually dwindles away.
Oklahoma’s income tax generates about $2 billion a year, a third of all general fund revenue. The tax also provides $300 million a year to public education, $280 million for state highway projects and $180 million for the teachers retirement system.
House Speaker Kris Steele, R-Shawnee, appointed a panel of House members to review the plans and determine the best aspects of the measures for incorporation into a single bill.
“This is a work in progress,” Steele said. “There will be a significant income tax reduction.”
Steele is the sponsor of House Bill 3061, which contains the income tax cuts outlined by Gov. Mary Fallin in her state of the state address in February.
The measure was amended to restore some tax exemptions eliminated under Fallin’s original proposal.
“It is not our desire to raise taxes on anyone, but rather what we’re after is to try to establish a plan that is fair to everyone,” Steele said. “It’s too early at this point to say what deductions or what incentives may be eliminated or which ones may be kept.”
Steele’s bill calls for cutting the tax rate to 2.25% for couples earning up to $70,000 a year, while those making more would face a rate of 3.5%. Those making less than $15,000 would have no state income tax liability.
The tax rate would go down 0.25% whenever state economic growth grows by 5% a year.
Rep. Earl Sears, R-Bartlesville, said legislative leaders and Fallin aides will work out a comprehensive tax plan from the five proposals. “We’re going to have an income tax cut for Oklahoma,” said Sears, chairman of the House Appropriations and Budget Committee.
Fallin is determined to cut the state income tax rate. “That effort remains on track in the Legislature, and the governor is happy that not only has her plan continued to advance, but other similar proposals have as well,” said spokesman Alex Weintz.
“Ultimately, we expect the governor and representatives from the House and Senate to take the best ideas from each tax reduction plan, and to pass and sign into law tax-reform legislation that benefits the citizens of Oklahoma, helps to create jobs and allows working families to keep more of their hard-earned money,” Weintz said.
Sen. Judy Eason McIntyre, D-Tulsa, said SB 1571, which passed the Senate early last week, would devastate state revenues. The bill, sponsored by Sen. Clark Jolley, R-Edmond, would phase out the personal income tax over 10 years.
“It’s like the chickens supporting Colonel Sanders,” McIntrye said. “People are going to suffer.”
The Oklahoma Tax Commission said the tax phase-out in Jolley’s bill would reduce general fund revenues by $650 million in fiscal 2013 and by $1.72 billion by 2016.
The Senate also approved a measure by Sen. Mike Mazzei, R-Tulsa, that would lower the tax rate to 4.75% over two years. The rate would go to 4.5% whenever annual revenues are 4% higher than fiscal 2011 collections. Mazzei chairs the Senate Appropriations Committee.