Fact Check: The impact of a .25-percent income tax cut to Oklahoma taxpayers

Proposal

• Lawmakers have previously proposed an across-the-board .25-percent cut to the state’s personal income tax.

How this impacts Oklahomans

• The Institute on Taxation and Economic Policy has estimate how much this would cut taxes for Oklahomans by income level: 

A .25-percent cut to Oklahoma’s personal income tax would provide little relief to everyday Oklahomans who need it most

How much state revenue is lost with a .25-percent cut to personal income tax 

• A .25-percent cut to Oklahoma’s personal income tax cut has been estimated by legislative researchers to cost the state between $235 million and $293 million annually when fully implemented. 

Background

• 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 12% smaller than it was two decades ago. [FY 2024 Budget Highlights]
• Oklahoma also 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.

Additional resources 

• National experts say Oklahoma is part of a damaging tax-cutting trend
  • Video of OK Policy’s Shiloh Kantz during the national press call about cutting state taxes
  • Transcript
• New national study shows Oklahoma’s tax system worsens inequality, among the nation’s most unfair
• Everyday Oklahomans will be hurt by sweeping revenue cuts
• Flat tax, tax triggers would make Oklahoma’s tax system less fair, less adequate, and less stable 
  • Current Tax Cut Proposals Don’t Help Most Oklahomans, May 2023 [Printable PDF]
• A Better Path Forward: A Budget and Tax Roadmap for Oklahoma