Fallin highlights more cuts to Okla. income tax

OKLAHOMA CITY — Gov. Mary Fallin outlined a budget plan Monday to deeply reduce Oklahoma's personal income tax rate by eliminating dozens of tax exemptions, including many claimed by poor and working-class Oklahomans.

In her State of the State address, Fallin said she wants to cut the state's highest income tax bracket from 5.25 percent to 3.5 percent beginning next January, and proposed that couples earning $30,000 or less would not pay income taxes. Couples earning between $30,000 and $70,000 would be taxed at 2.25 percent.

Her plan would shrink the number of income tax brackets from seven to three and impose a revenue-growth trigger that would further reduce the income tax by one-quarter of 1 percent each time state revenues grow by at least 5 percent.

The Republican governor said the proposal would "immediately cut income taxes for Oklahomans in all tax brackets, it will simplify the tax code and will chart a course towards the gradual elimination of our income tax.

"It will give Oklahoma the lowest income tax rate in our region, besides Texas, making us a more competitive state for job creation and retention."

Oklahoma currently has seven tax brackets ranging from 0.5 percent for single taxpayers earning $1,000 or more in taxable income to the top rate of 5.25 percent on taxable income of more than $8,701.

While she didn't offer specifics in her speech, her budget officials said the plan calls for making up the estimated $1 billion in lost revenue by eliminating nearly 40 different tax credits, including the child care and sales tax relief credits for low-income Oklahomans. It would also end personal exemptions claimed by about 1.5 million Oklahoma tax filers each year.

"Low-income families with children and low-income seniors will pay more in income tax. That's a concern," said David Blatt, director of the Oklahoma Policy Institute, a Tulsa-based think-tank. "It's cut taxes first and then ask questions later."

Democrats also blasted the plan, saying it makes little sense for Fallin to call for increased funding for transportation, education and performance audits for state agencies while endorsing a plan to slash a funding source that accounts for more than one-third of state revenue.

"Gov. Fallin cannot expect to cut and then eliminate the state income tax, which constitutes one-third of the state's revenue," said Rep. Mike Brown, D-Tahlequah, "and in the same breath, talk about making the Department of Human Services one of the best in the nation, or repairing all our bridges by 2019."