Call to Action
Contact your lawmakers to urge them to oppose across-the-board, untargeted tax cuts and other handouts for wealthy Oklahomans and out-of-state companies.
• Current Tax Cut Proposals Don’t Help Most Oklahomans [Printable PDF]
With $10.8 billion in recurring revenue and at least $1.6 billion in one-time funds, the Oklahoma Legislature has significant fiscal decisions to make this session. Oklahoma leaders have repeatedly stated their intentions, including House Speaker Charles McCall who wants to provide “inflation relief” and Gov. Kevin Stitt who heralds a commitment to “fiscal discipline.” However, most of the legislative proposals made public so far do not meet either goal.
Despite an uncertain economy, the possibility of a recession, and Oklahoma’s history of revenue failures, lawmakers have proposed several significant and permanent tax reductions that would almost exclusively benefit the wealthiest Oklahomans. These proposals would significantly hurt future revenue collections, which harms the delivery of essential programs and services that meet the needs of everyday Oklahomans.
Tax reform should focus on targeted relief and fiscal conservatism.
Tax reform proposals this session include changes and reductions to the personal income tax rate, changes to the ways by which corporations calculate and pay taxes, sales tax reductions, and a massive tax credit to support private schools. Lawmakers have billed these proposals as “inflation relief.” They are not. If anything, pouring more money into the economy in the form of across-the-board and untargeted tax cuts would likely make inflation worse.
Additionally, the proposed tax cuts for corporations and cuts to the personal income tax will primarily benefit out-of-state and very wealthy individuals, not low- and middle-income workers who actually need inflation relief. For example, cutting the personal income tax by 0.25 percent would cut taxes for at least 98 percent of Oklahomans making more than $72,000, but only 54 percent of Oklahomans making less than $22,000, according to an analysis by the Institute on Taxation and Economic Policy. The amount of relief would also be skewed to the wealthy: the richest one percent would see an average tax cut of $2,381, compared to just $15 for the poorest 20 percent and $93 for the middle class.
Fiscally conservative tax reform would prioritize those who most need the assistance and would consider the state’s long-term fiscal health. Current proposals don’t meet those parameters. Today’s proposed tax cuts would jeopardize tomorrow’s state revenue, leaving Oklahoma unable to meet the state’s many underfunded needs, like teacher pay and mental health treatment. We’ve been here before, with decades of tax cuts that have caused the state to declare a revenue failure nine times between 2000 and 2020. Furthermore, once lawmakers cut state tax revenue, it’s unlikely to ever return thanks to State Question 640’s requirement for a supermajority of both legislative chambers — or a statewide vote of the people — to raise taxes. This means any tax cuts lawmakers enact are effectively permanent.
Several of the major tax reform proposals being debated in the legislature do not meet the stated goals of legislative leaders to provide fiscally responsible inflation relief.
|Bill and author||The bill would:||When fully phased in, would cost:||Short- and long-term impacts:|
(R – McCall)
|reduce the personal income tax across the board by 0.50%||$465 million annually||• make inflation worse than it already is
• majority of the benefit would go to the wealthiest Oklahomans
(R – McCall)
|result in every household’s earnings (above $9,750 for single filers, $16,250 for heads of household, and $19,450 for joint filers) being taxed at 4.25%||$426 million annually||• ensure that lower earners pay a higher share of their income in taxes
• send the largest benefit to the wealthiest Oklahomans
(R – Lepak)
|establish a flat personal income tax of 4.5% and provide mechanisms for periodic rate reductions||$145 million annually (larger cost as the personal income tax is further decreased)||• creates enormous economic uncertainty because it includes automatic tax cut “triggers” that do not account for future economic needs|
(R – Treat)
|create a new savings fund (the Legacy Fund) and authorize money to be used for tax reductions when the fund reaches $1.1 billion||unknown||• missed opportunities to invest in improved infrastructure, workforce, and mental health services|
(R – Boatman)
|change the way corporations calculate tax responsibility||unknown, but likely would create a “potential decrease” to state tax collections||• corporate tax cuts primarily benefit out-of-state businesses
• little evidence that this change would have an impact on economic development
(R – McCall)
|eliminate the state portion of the sales tax on groceries||$370 million annually||• no benefit to the lowest-income Oklahoma families, as products purchased with SNAP and WIC are already exempt from sales tax|
(R – McCall)
|create a $5,000 refundable tax credit for private school tuition; $2,500 credit for homeschool expenses||$271 million at first; when take-up grows, the cost could grow exponentially||• other states have seen large cost increases in subsequent years after such credits were implemented
• would overwhelmingly benefit the wealthiest Oklahomans
• significant potential to undermine public school budgets statewide
Some tax reform and investment options would provide a larger benefit to more Oklahomans.
Lawmakers have better options. Instead of across-the-board tax cuts that are not fiscally responsible, state leaders can provide a much larger, more targeted tax cut for low- and middle-income families by expanding the Sales Tax Relief Credit from $40 to $200 per person. Created in 1990 to offset the cost of groceries, this credit has remained at $40 for 33 years and has lost more than 60 percent of its buying power during this time. Increasing the amount and updating the income eligibility limits would reduce taxes for 576,000 low- and middle-income Oklahoma households, according to an OK Policy analysis. This proposal would cost the state about $120 million – or about half the cost of a 0.25 percent reduction in the personal income tax, according to an analysis by the Institute on Taxation and Economic Policy.
Additionally, lawmakers can make smart investments that will set future Oklahomans up for success. A fiscally responsible approach includes investing in proven strategies that increase prosperity for all Oklahomans. Business leaders have confirmed that Oklahoma’s largest barriers to economic development success are workforce and infrastructure, not taxes. Instead of cutting taxes, the state could meet businesses’ needs by investing in workforce development, vocational and technical training, higher education, training programs for justice-involved individuals, teacher pay, mental health treatment, and more. These options are much more responsible choices in the long-term than ill-considered tax cuts.
Effective tax reform must be targeted and fiscally responsible.
Some state leaders know that the state will likely see slowing revenue growth – or even revenue decline – in the near future. Oklahoma’s future success depends on the choices our elected officials make today. Lawmakers can enact proposals for fiscally responsible and targeted inflation relief, including expansion of the Sales Tax Relief Credit, to help our friends and neighbors who have been hit hardest by price increases. By making fiscally responsible choices this session, lawmakers can deliver targeted tax relief to Oklahomans who most need it without jeopardizing the state’s future financial health. Across-the-board tax cuts that almost exclusively benefit the wealthy and fail to meet either of those parameters. Such proposals may be politically popular, but they jeopardize Oklahoma’s long-term fiscal health.