Legislators in Oklahoma are set to descend upon the state capitol in the beginning of February to gavel in the start of another legislative session in Oklahoma City. Already, however, there are several important pieces of legislation that have been filed which would reduce the tax burden on Oklahomans and allow them to keep more of their hard earned dollars. SB 1849 and HB 3291 would gradually lower the state’s individual income tax, eventually bringing it down to 4% by 2018 – keeping the state relatively competitive with the rate reductions in neighboring Kansas.
Currently, Oklahoma asses a levy of 5.25% on its citizens, and a reduction in this rate would lead to employees incurring greater take home pay, and businesses having more capitol to grow, expand and create jobs. Gov. Mary Fallin has indicated that she supports the idea of an income tax cut, and enacting such pro-growth changes to the tax code should be a ‘no brainer’ for legislators in the Sooner state.
A much smaller income tax cut passed last session was recently declared unconstitutional by the state Supreme Court due to the legislation not being single subject. The legislation contained an appropriations provision, funding the restoration of the State Capitol building.
Changes to Oklahoma’s income tax are important in the context of competition amongst the states, as SB 1849’s sponsor, State Senator David Holt rightfully points out: “We find ourselves in an income-tax sandwich between Texas, which has no income tax, and Kansas, which has lowered its rate below ours.”
This assessment by Senator Holt is spot on. If Oklahoma wishes to remain competitive with her neighbors and continue to attract new businesses, it is important that legislators in the state continue to foster an environment which is conducive to economic growth and prosperity. It is no coincidence that in the past decade the states which do not levy an income tax at all experienced far greater growth in employment, GDP, and migration then those which still do.
SB 1849 and HB 3291 would move Oklahoma in the right direction and ensure that she remains economically relevant in an increasingly competitive region.