FACT CHECK: How would the governor’s proposal to cut, eliminate personal income tax affect Oklahoma? -

Proposal

Gov. Stitt has proposed a 0.5% cut to the state’s individual income tax rate. This income tax cut would be his first proposed step to eventually eliminate the state’s personal income tax, which he calls a “path to zero.”(January 29, 2025)

The Institute on Taxation and Economic Policy has estimated how much these proposed tax cuts would impact Oklahomans, by income level:

2025 Income	Lowest 20%	Middle 20%	Top 1%
Income Range Start	Below	$46,300	$683,500
Income Range End	$24,700	$79,700	and above
Average Tax Cut (annual)	$15	$180	$5,860
Source: Institute for Taxation and Economic Policy

2025 Income	Lowest 20%	Middle 20%	Top 1%
Income Range Start	Below	$46,300	$683,500
Income Range End	$24,700	$79,700	and above
Average Tax Cut (annual)	INCREASE taxes by $9*	$1,500	$55,295
*Eliminating the income tax would get rid of state tax code components that return money to low-income residents Source: Institute for Taxation and Economic Policy

A 0.5-percent cut to Oklahoma’s personal income tax cut would reduce state revenue by an estimated $660 million annually when fully implemented.
- This is more than 5% of the appropriated state revenue for the current fiscal year (FY 2025).
- For relative size, this is more than the state allocated for the entire Department of Corrections this year ($544 million).

Eliminating the personal income tax would reduce state revenue by about $5.4 billion annually when fully implemented.
- This is about 44% of this year’s budget (FY 2025).
- For relative size, this is more than the state allocated for all health and social services, human services, and public safety this fiscal year, and it is nearly equal to all education expenses in FY 2025.

For lawmakers who want to put money back in Oklahomans’ pockets, they should expand tax credits that are already on the books.
Modernizing targeted tax credits — such as the Earned Income Tax Credit, Child Tax Credit, and Sales Tax Relief Credit — is the most fiscally responsible way to help working families who need it most.
Adjusting tax credits requires only a simple majority vote, which makes them easier to raise or lower during difficult economic times.

Oklahoma lawmakers have cut the state’s personal income tax nine times in the last 20 years bringing it down from 7% in 2002 to 4.75% today.
When adjusted for inflation and population growth, the current year state budget is 8.8% smaller than it was two decades ago. [FY 2025 Budget Highlights]
During the past two decades, Oklahoma lawmakers have enacted various revenue and tax cuts that net to more than $2 billion annually. This loss of revenue capacity for essential services means Oklahomans are not getting the public education, health care, social services, and infrastructure they need.
Oklahoma has the nation’s highest threshold for raising new revenue (State Question 640).
- As a result, Oklahoma lawmakers have voted to raise new revenue only once since 1992.
The Legislative Office of Fiscal Transparency in January 2024 released a budget stress test report showing Oklahoma is financially unprepared for anything more than a mild economic downturn.
In December 2024, the Board of Equalization provided an initial budget projection for the coming fiscal year (that starts July 1, 2025) that was about 1% lower than last year.