Oklahoma’s House and Senate are still in a heated battle over the budget, primarily disagreeing over further slashing the state’s income tax. That was a main sticking point at a historic budget summit held at the capitol on Monday.  

As this year’s session has unfolded, the House passed a plan in March that would put the state income tax on the path to elimination by replacing the personal income tax with a 4.5% flat tax and lowering it by 0.25% every year that revenues reached a certain level above expectations.   

The House then passed a 0.25% rate cut in their budget plan.   

The House has done their part to support income tax cuts. Governor Stitt has called for eliminating the income tax, a flat tax, and said he will sign any tax cut that makes it to his desk.  

This year, the Governor signed legislation to eliminate the state sales tax on groceries. Meanwhile, the Senate has remained opposed to further tax cuts. The Senate originated the grocery tax cut.  

Senate President Pro Tempore Greg Treat (R) argues that Oklahoma can’t afford another tax cut after the state eliminated the grocery tax earlier this year. Concerns about past economic downturns and budget shortfalls were also raised. Legislators are still working with a $543 million surplus.  

The 0.25% income tax rate cut that is currently the focus of negotiations would only amount to an estimated $250 million tax savings for Oklahomans, and just a fraction of that in the first year.  

In short, the state has the resources, and Oklahoma’s recent tax cuts to income and corporate rates quickly resulted in higher revenues as the economy grew.    

Governor Stitt says the state has record savings and needs a tax cut to compete with other states. “We have to think about the taxpayers,” he said during the summit. 

Legislators could even pass the plan to start gradually eliminating the state income tax, HB 2950. Because the bill gradually reduces rates when revenues are above projections, income taxes cannot be cut when the money ‘is not there’. The Senate’s main concern would be assuaged by a revenue-trigger income tax elimination plan.  

Eliminating the income tax would make Oklahoma a leader among low tax states. “It is an understatement to say eliminating the state income tax would be game changer for Oklahoma, it would lead to massive investment, growth, and new taxpayers moving into the state,” said Americans for Tax Reform President Grover Norquist. “After major conservative policy accomplishments on school choice, corporate income taxes, and improvements to the criminal justice system, Oklahoma is becoming one of the most welcoming and dynamic states in the country.” 

“We don’t even know where we are at right now,” Stitt said after the budget summit meeting on Monday. The House, Senate, and Governor Stitt will reconvene on Thursday, hopefully deciding to continue putting Oklahoma taxpayers first.