Oklahoma Governor Mary Fallin, in her State of the State Address, outlined a bold plan for tax reform focused on reducing rates and consolidating Oklahoma’s seven tax brackets.
The plan would end Oklahoma’s complicated seven bracket income tax structure that begins taxing on the first penny any Oklahoman earns, instead replacing the structure with three brackets – Oklahoman’s making below $15,000 a year would pay a 0-percent rate, those making under $35,000 would pay a 2.25-percent rate, and those making $35,000 and above would pay a 3.5-percent rate.
The Tax Foundation ranks Oklahoma as 38th in the nation in terms of the individual income tax rate. Reducing the top statutory rate to 3.5-percent – reduced from 5.25-percent – would give Oklahoma the second lowest top statutory rate in the region. Lower than Arkansas, Kansas, Louisiana, Nebraska, and New Mexico. Only Texas would have a lower rate – the state does not have an income tax.
The Governor’s plan calls for further reductions in the income tax after 2013, with reductions of a quarter point every year that Oklahoma hits a revenue growth trigger of 5-percent – the eventual goal being the reduction of all income tax rates to 0-percent.
To read the Governor’s tax plan, click here.
There is also talk in Oklahoma of a legislative proposal lowering the universal service fund tax rate on phones. The combined state and local tax for wireless services reaches above 10 percent, one of the highest in the nation, and is over twice as high as the sales tax rate of 4.5 percent. This would help create a low and flat tax structure for one of the higher taxed services in Oklahoma as well.