By Ricky O'Bannon
OKLAHOMA CITY, Okla. —
Gov. Mary Fallin gave more details to a plan that aims to eliminate Oklahoma’s personal income tax during her annual State of the State address, which kicked off the 2012 legislative session Monday.
The speech centered on making Oklahoma’s government more efficient while creating a business-friendly environment to spur growth. Fallin and other Republican leaders have indicated that the personal income tax will be one of the key issues of the new session.
“The Oklahoma Tax Reduction and Simplification Act will immediately cut income taxes for Oklahomans in all tax brackets,” Fallin said. “It will simplify the tax code and chart a course forward toward the gradual elimination of our income tax.”
In the plan the governor laid out Monday, families making less than $30,000 annually would pay no income tax starting in 2013. Those making between $30,000 and $70,000 would pay a state income tax rate of 2.25 percent, and those making more than $70,000 would pay 3.5 percent.
The income tax would be phased out over time. According to Fallin’s plan, the income tax rate would be reduced by .25 percent based on state revenue triggers. That means any time state revenues increase by more than 5 percent over the previous year, the income tax would automatically be cut .25 percent.
Oklahoma’s current top income tax rate is 5.25 percent for those making more than $8,701.
“That growth trigger gives the state a safety net should we experience another economic trigger,” Fallin said.
To make up for the lost revenue, Fallin said the state would rely on eliminating certain tax loopholes and credits and continue to cut government waste. A task force on tax credits met before the 2012 session and has recommended a number of reforms and credit elimination, which could make up some revenue. However, the major factor that Fallin and other supporters of the plan are counting on is that the income tax cut will spur growth and state revenues by extension.
“I believe our plan is a game-changer; it’s a job creator,” Fallin said. “We’re going to capitalize on the economic growth we expect to see as a result of having a pro-jobs, pro-business tax reform agenda.”
To view the governor's entire speech click here.