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 [Printable PDF]

With less than two weeks left in the 2023 legislative session, lawmakers have very little time remaining to reach agreement on, reveal, and adopt the Fiscal Year 2024 state budget. Bills that would change tax policy are typically unveiled as part of the budget package. Though they have not yet been introduced, this year’s budget package might include several ill-advised tax changes, such as the creation of private school vouchers via a tax credit. 

Another troubling proposal is a significant change to the personal income tax that would include restructuring it as a flat income tax and adding certain triggers that would automatically cut taxes further in the future. This idea was proposed in House Bill 2285. While that specific bill was not heard in the Senate, the concept could easily resurface in the final budget package. Making these changes to the personal income tax would make Oklahoma’s tax system less fair, less adequate, and less stable than it already is. 

A flat income tax will make the tax system more unfair 

Flat taxes – which subject all taxable income to the same tax rate – mean low- and middle-income families pay a larger share of their income in total taxes than wealthy families do. Currently, Oklahoma’s income tax is slightly graduated, meaning that an individual’s tax rate slightly increases with their income, with the full tax rate of 4.75 percent kicking in at $7,200 of taxable income. While a more graduated tax would be better for low- and middle-income residents, Oklahoma’s somewhat graduated nature of the current tax keeps the lowest-income Oklahomans from paying more. Indeed, the slightly graduated nature of the current tax is the only aspect of our current tax system that offsets the regressivity of the state’s high reliance on sales tax.

If Oklahoma were to adopt the changes as laid out in HB 2285 – adopting a 4.5 percent flat tax and increasing the standard deduction – the changes would have a skewed and unfair impact. Almost two-thirds of the tax cut – 61 percent – would go to the wealthiest 20 percent of Oklahomans. And of those Oklahomans who would experience a tax increase, 69 percent of the increase would be borne by those making less than $119,000 annually, according to an analysis by the Institute on Taxation and Economic Policy. While HB 2285 may not be the ultimate proposal, any change that would flatten the personal income tax would disproportionately benefit the wealthiest Oklahomans.    


A flat income tax will cost vital state revenue 

In addition to making the tax system less fair, flattening the income tax will also cost the state significant revenue. Using the changes as outlined in HB 2285 as a guide, cost estimates range from $145 million to $251 million annually (according to an analysis by the Institute on Taxation and Economic Policy). That revenue loss would impact the state’s ability to provide services on which all Oklahomans rely. For purpose of comparison, the entire annual budget for the Department of Career and Technology Education was $142 million in Fiscal Year 2023. So, restructuring the income tax system using this flat tax proposal would cost the state the equivalent of the entire CareerTech budget. Further, if the state needed to raise revenue to offset this loss in the future, that raise would be subject to the supermajority requirements of State Question 640, which effectively ensure that when lost, tax revenue will not be brought back. 

Tax cut triggers jeopardize the state’s long-term fiscal health and make state revenue more unstable 

Finally, the second part of HB 2285 consists of periodic income tax rate reductions when certain revenue conditions are met. Oklahoma has tried this method before — and it failed. Putting future tax cuts into statute now takes away the ability of future lawmakers to respond to economic changes or crises. It would also create enormous revenue uncertainty, as a future tax cut could go into effect with little notice. And since Oklahoma does not project revenue or fiscal impacts past a year or two, the true cost to the state of a change of this magnitude is unknown. Tax cut triggers are politically attractive for current lawmakers because they may not be in office to feel and respond to the negative impacts from these future revenue cuts.  

Flat taxes and automatic triggers are a bad combination for Oklahoma’s future success

At a moment when tax revenue is artificially high and the future of the economy is immensely uncertain, lawmakers would be irresponsible if they enact long-lasting tax cuts that will permanently reduce revenue and fundamentally change the tax system. Oklahoma’s tax system is already unfair and relies on unstable revenue sources. Additionally, Oklahoma invests less in its residents, as it spends less per capita on programs and services than the majority of other states. Rather than further reducing vital state revenue while taking power away from future lawmakers to respond to subsequent crises, Oklahoma’s elected officials should protect revenue and make targeted investments in critical needs.


Emma Morris worked as Oklahoma Policy Institute's Health Care and Fiscal Policy Analyst from April 2021 to January 2024. She had previously worked as an OK Policy intern and as the Health Care Policy Fellow. Previous experience included working as a case manager with justice-involved individuals and volunteering as a mentor for youth in her community. Emma holds dual bachelor’s degrees in Women’s and Gender Studies and Public and Nonprofit Administration from the University of Oklahoma, and is currently working on a Master of Public Administration degree from OU-Tulsa. She is an alumna of OK Policy’s 2019 Summer Policy Institute and The Mine, a social entrepreneurship fellowship.

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