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    • The proposed law would reduce Oklahoma’s income tax revenue
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    The proposed law would reduce Oklahoma’s income tax revenue

    Online Niel Posted on

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    The first bill filed in the Oklahoma Senate ahead of the 2025 legislative session reignites the heated debate over tax cuts.

    Senate Bill 1proposed by Sen. Micheal Bergstrom, R-Adair, would cut Oklahoma’s personal income tax rate by a quarter of a percentage point each year until the rate is zero. The declines would stop in the face of budget deficits.

    Cutting the personal income tax has long been a goal of Gov. Kevin Stitt and many other GOP lawmakers, but critics have said Oklahoma can’t afford to cover a major cut.

    Personal income tax collections accounted for about one-third of the $13.3 billion in tax revenue Oklahoma collects in 2023. Studies have shown that a 0.25 percent cut could cost the state about $240 million a year.

    Bergstrom’s bill is likely the first of many tax cut proposals lawmakers will consider next year, and it’s too early to know which ideas will win the most. Both legislative chambers will also have new leaders, adding an extra layer of uncertainty to the discussions. While former House Speaker Charles McCall joined Stitt’s calls for deeper tax cuts, former Senate staffer Greg Treat was all but opposed to cutting the state’s share of the food sales tax.

    Rep. Kyle Hilbert, R-Bristow, signaled in a statement to The Oklahoman that he would continue McCall’s push for more tax cuts, saying it would help Oklahomans cope with higher prices. He did not directly address his position on Bergstrom’s proposal.

    “In Parliament, if there’s a tax that exists, we’ve tried to reduce it,” he said.

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    Sen. Lonnie Paxton, R-Tuttle, who is slated to become Senate president pro tempore, was not available to comment on Bergstrom’s measure or other potential tax cut proposals.

    Bergstrom said in a statement that he saw his proposal as a way to support “hardworking Oklahomans.”

    “This measured, step-by-step approach ensures our state remains on sound financial footing, giving families and businesses more of their hard-earned money,” he said.

    How the proposed tax cut would work in Oklahoma

    Oklahoma’s current top tax rate is 4.75 percent, and if Bergstrom’s bill passes, the rate would first drop to 4.5 percent. It would continue to decrease each year as long as the state has at least $400 million in available revenue. Incremental revenue represents an increase in tax revenue that states collect over a period of time.

    In 2035, the $400 million threshold will be adjusted every 10 years to account for inflation so the plan remains “economically viable” over time, according to a statement Bergstrom issued about his intent in the back of the invoice.

    The Oklahoma State Board of Equalization, which meets in February, would have to certify the new tax rate. If the bill passes after the board’s annual meeting, the first reduction could occur in 2026.

    Asked if the governor supported the proposal, a spokesman for Stitt said in an email that he would sign any tax cuts that reach his desk, echoing his long-standing position.

    During a May 2024 budget summit, Stitt said the big picture from the governor’s point of view is no deficit spending and an income tax cut.

    “I think it’s important for Oklahomans,” the governor said at the time. “If we’re going to spend savings, if we’re going to invest in a lot of things, then we should be able to give Oklahomans a tax break.”

    Senate Minority Leader Sen. Julia Kirt, D-Oklahoma City, said her party’s support for the tax cuts depends on how they are structured to ensure that Oklahoma workers benefit the most.

    “We are not interested in tax giveaways to rich people at the expense of our public schools, roads and critical infrastructure,” she said in a text message.

    Taxes reduce an ongoing debate among Oklahoma lawmakers

    This is not the first time that Oklahoma has flirted with the idea of ​​reducing the income tax with the eventual goal of reaching zero. Last year’s session saw many lawmakers eager to cut taxes, including several attempted bills and budget talks.

    Nor is Bergstrom’s idea the first to suggest this method of gradually reducing income tax. Last session, the House passed House Bill 2950written by McCall, which would have implemented a flat tax of 4.5% starting in 2024 across all tax brackets. The bill also would have gradually reduced the rate over time if the increase in state revenue is $400 million or more.

    A second bill, House Bill 2949 by McCall made a similar proposal but left the current tax rate in place before it was reduced. Both bills passed the House but died in the Senate.

    Treat told The Oklahoman at the time that “legislators need to look at the entire budget before making decisions about cutting the income tax rate.” He said he didn’t think there was enough money to fund discounts in both food sales tax and personal income tax.

    Lawmakers in both chambers agreed to eliminate the state’s 4.5 percent portion of the grocery tax, which was estimated to save about $3.38 per $85 grocery bill or about $104 per person in taxes every year. The cut is estimated cost about $312 million this year and $418 million next year, Treat told The Oklahoman in February. Local taxes still apply and some foods are still taxed.

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