Eliminating the income tax, making it easier to grow a business, and more improvements to the criminal justice system headlined Oklahoma Governor Kevin Stitt’s 2024 State of the State Address Monday.
The Governor challenged legislators to keep from falling into the trap of growing government, urging them to stop growing the state budget, and get significant tax reforms accomplished.
“We can’t let our success make us complacent and forget what made the Oklahoma Dream possible: free enterprise and individual liberties. Not more government programs,” Stitt said.
After a major victory in enacting universal school choice last session, Gov. Stitt focused on the need to cut taxes and make the state an easier place to operate a business, saying:
“When I stop to think about Oklahoma in 20 years, here’s what I see: I see people from all over the country moving here so they can keep more of their hard-earned money thanks to our 0% income tax. I see entrepreneurs flocking here. We’re the business headquarters capital of the world.”
The state legislature has wrangled over tax cuts for multiple sessions – and multiple special sessions called to focus on tax cuts. Just last week the Senate, again, dodged taking any action on multiple tax cut bills passed by the House of Representatives.
Each of the last two years the House has passed major income tax reform bills, one which gradually eliminates the income tax and one that moves to a flat 2.75% rate over time. Both used a revenue trigger model, which devotes a portion of excess revenues to reduce income tax rates, to enable tax cuts.
Americans for Tax Reform President Grover Norquist added his support for Oklahoma tax cuts, saying: “This is the year for Oklahoma’s Republican supermajority to get tax cuts done. The state government has been growing, taking in more tax dollars than needed, taxpayers deserve permanent relief.”
The policy tools are there. The surplus revenues are there. As Governor Stitt noted, “our recurring expenses grew last year by over $1.14 billion dollars.” The state has seen the budget, and income tax revenues, grow significantly in the past five years.
On tax cuts the Governor asked, “if not now, when?” He added, “Let’s get Oklahoma back on the path to zero.”
There are 10 states working toward income tax elimination, and 12 states with a flat tax. Notably Texas is among 7 states with no income tax. Neighboring Arkansas just joined the party by cutting its income tax late last year, and Gov. Sanders has indicated support for elimination.
Gov. Stitt sees Oklahoma is competing with these states, and doing so with an outdated, regressive income tax system. The state’s top 4.75% rate is middle of the pack. Despite a complicated set of brackets, that rate impacts 84% of Oklahoma taxpayers because it is not indexed for inflation.
This session will be a reckoning on tax reform.
The Governor also championed other priorities, including additional improvements to the state’s criminal justice system, saying: “Now, we need to focus on limiting fines, fees, and court costs to only what is needed for restitution. We need to address civil asset forfeiture.”
Oklahoma is overdue for civil asset forfeiture reform. The state has not taken major steps to improve a system that lets the government take peoples’ property without a crime having been committed.
Reforms that could be on the table include transparency for property that has been seized, a process to appeal a seizure that is straightforward, closing the “equitable sharing loophole,” and requiring a conviction for property to be kept by the government. Abolishing forfeiture entirely has been achieved in three states.
A big session is now underway for Oklahoma taxpayers who await the answer to that question: if not now, when?