April 25, 2023
To: Members of the Oklahoma Senate
From: Americans for Tax Reform
Re: Support Income Tax Relief, HB 2285
On behalf of Americans for Tax Reform (ATR) and our supporters across Oklahoma, I urge you to approve House Bill 2285 (HB 2285). This bold, conservative legislation would flatten and reduce the personal income tax burden on Oklahomans, while setting a path to future relief.
When the state government takes in more money than needed, and expected, to cover its spending, those tax dollars should be returned to taxpayers. HB 2285 accomplishes this goal, creating a flat tax rate of 4.50%, and increasing the standard deduction so lower-income brackets don’t see a net tax increase. It puts Oklahoma taxpayers first by using excess revenues to permanently reduce the income tax rate, a policy often referred to as revenue triggers, until the rate reaches 2.75%.
This rate would be the second lowest flat income tax rate in the nation, and make Oklahoma a top 10 income tax climate – behind only the zero income tax states and Arizona.
This conservative approach will ensure rates only decrease in a gradual fashion, when there is plenty of cushion in the budget, avoiding any future revenue surprises. The bill would ensure hard-working Oklahomans won’t have to fight with interests who will demand government spend future surpluses on them.
HB 2285 features very different revenue triggers compared to the old, flawed version. The state’s old revenue triggers used projected revenues, rather than confirmed revenues, meaning taxes could be cut even when the state never took in the extra money. The old triggers also relied on fund balances, which causes the reverse problem, allowing legislators to avoid a scheduled tax cut by moving money out of one pot, and into another.
The time is now to pass HB 2285. Currently, the 4.75% top income tax rate for Oklahoma is just below blue Massachusetts’ 5.1% and Illinois’ 4.95%. Since this rate kicks in at just $7,200 in earnings for individuals, practically every worker is paying that rate, despite having six income brackets which still add complexity.
HB 2285 sends a clear message to the rest of the country that Oklahoma is here to win the competition for jobs, businesses, and families fleeing higher tax states. States that have low, or no, income taxes are winning the competition for people, jobs, and economic growth. Meanwhile high-tax states like California and New York are watching people stampede through the exits.
From April 2020 to July 2022, the 15 lowest-tax states gained 2.3 million people, or 2.2% of their population. The 15 highest-tax states lost 1.2 million people or 1% of their population. Texas and Florida increased their populations by 1.6 million people combined.
A Tax Foundation analysis revealed states lost 1% of their population for every two points of income tax.
Red states are leading on reducing their tax burdens. In 2021, 14 states cut their income taxes, in 2022 we saw eight more state income tax cuts. More than 10 states are considering income tax reductions this year.
There are currently eight states with no income tax, New Hampshire will soon be the ninth. 10 more states have begun phasing their income taxes to zero.
Tax relief is also an opportunity for the Republican-led legislature to set a contrast with Democrats in Washington D.C. who are taking money out of Oklahomans’ pockets through new tax hikes, high-cost energy policies, and high inflation.
Oklahoma can take a massive step toward income tax elimination and make the state one of the most attractive destinations for people and businesses in the nation by passing HB 2285.
We applaud the legislature’s continued hard work on bold tax relief, especially Rep. Lepak and Sen. Rader for sponsoring tax reform legislation, and Governor Stitt’s outspoken support for reducing the burden government places on Oklahomans. ATR is available to help in any way we can as you advance tax relief this session.
Americans for Tax Reform