OKPOLICY.ORG
House Speaker Charles McCall announced last week his intention to work on legislation to reduce the personal income tax and to eliminate the corporate income tax over five years. Last Tuesday, McCall removed his House Bill 2041 from the Rules Committee and reassigned it to the Appropriations and Budget Committee. At the time, it was a “shell bill” containing only the title, the “Oklahoma Revenue and Taxation Reform Act of 2021.”
On Wednesday, the Speaker filed a committee substitute for HB 2041, which contained extensive language reducing the personal and corporate income taxes, then moved the bill back to the Rules Committee. Speaker McCall said he introduced the bill “to largely start a conversation about tax relief in our state given the rebound from the pandemic and to make our state’s profile more competitive for jobs and industry in the future.” Although he said he intended to move the bill along the legislative process this year, the deadline for removing bills from committee expired on Thursday. Presumably, the bill will reside in committee until next session, although under House rules the Speaker could bring it out.
The corporate income tax was raised from 5 percent to the current 6 percent in 1990 as part of the revenue package that paid for the education reforms in the HB 1017 Education Reform and Revenue Act. That package consisted of a personal income tax increase, a one-half cent sales tax increase, and the one percent corporate income tax increase. The money raised by these tax increases still goes into what is known as the “HB 1017 Revolving Fund” which is 100 percent earmarked for education. The sales tax and the corporate income taxes have remained since 1990, although personal income taxes have now been reduced far more than the HB 1017 increase. Some of the HB 1017 reforms, notably class size restrictions, are no longer being implemented.
No doubt the Speaker, from Atoka, hears a lot about how wonderful the tax structure is in Texas where there is no state income tax. And it’s true that Texans love it. It is probably also true that the wealthy corporate deciders who choose business locations look favorably at the possibility of avoiding state income taxes. What often goes unsaid, however, is that Oklahoma’s overall tax burden is less than that of Texas. According to Wallethub.com, Oklahoma ranks 44th in tax burden at 6.94 percent, while Texas ranks 32nd at 8.20 percent of personal income.
One big difference is that Oklahoma ranks 49th in property taxes (1.65 percent) while Texas ranks 9th (3.95 percent). Texas also has several business taxes that likely more than make up for Oklahoma’s corporate income tax. Hopefully, as the tax relief discussions move along, they will produce a way to raise our tax revenue while, like Texas, making us like it better. If Texas can do it, we surely can too.
