OKPOLICY.ORG
By Dale Denwalt
Oklahomans expecting an income tax cut will probably have to keep waiting.
Lawmakers have approved a bill repealing the next automatic cut, which could trigger as state revenues improve.
The Oklahoma House overwhelmingly supported the measure on Wednesday. It has to return to the Senate for a procedural vote before heading to Gov. Mary Fallin’s desk, but the bill’s authors expect no problems.
If Fallin signs it, the top tax rate will remain at 5 percent.
A 2014 law linked the state tax rate to revenue growth so that as Oklahoma brought in more money, the rate would automatically fall. The next and final trigger would lower the tax rate to 4.85 percent for single-filers’ taxable income over $8,700 and joint filers’ income over $15,000.
The bill’s author, state Rep. Earl Sears, said a perfect storm of lower oil prices and subsequent layoffs that rippled through the economy forced Republican leadership to abandon the tax cut.
“Our Republican caucus is not moving away from a good tax policy, but at this particular time is the right time to repeal this 4.85 (percent rate) until our economy stabilizes,” said Sears, R-Bartlesville. “When it does, we will return to good tax policy.”
The adoption of Senate Bill 170 marks a change in GOP attitudes about keeping the automatic trigger. During the previous two years of budget shortfalls, similar bills weren’t heard.
David Blatt, executive director of the Oklahoma Policy Institute, has pushed lawmakers to end the trigger mechanism.
“We are delighted to see the Legislature has chosen to repeal this next scheduled tax cut,” Blatt said. “Tax triggers are profoundly misguided polices because you can end up in the situation we found ourselves in last year when you’re dealing with revenue failures.”
The last tax cut took effect in 2016. It was triggered a year earlier by a prediction that state revenue would grow more than the immediate cost of the cut. Instead of growing, however, revenue fell by hundreds of millions of dollars when the price of oil tumbled.
Oklahoma is now facing its third consecutive budget shortfall as lawmakers work to find an extra $878 million to fill next year’s gap.
“We know it’s going to take years for Oklahoma to recover from the effect of the budget cuts of the last few years,” Blatt said. “Prior to repeal, we could be in a situation where even the tiniest revenue growth could trigger the next tax cut.”
Sears said it’s likely that without his bill, the tax cut could be triggered later this year. He said Oklahoma’s economy is improving enough that estimated growth, about $100 million, would offset the cost and force officials to lower the rate.
House Democratic Leader Scott Inman criticized the GOP even as he and every other Democrat in the chamber supported the bill.
“Today, finally, we’re going to take one small step to reverse this state’s financial course,” said Inman, D-Del City. “You know we can’t cut our way out of this mess because it was cuts that put us into this mess.”
http://newsok.com/article/5546122
