Taxes, including tax cuts proposals, expected on agenda for 2023 legislative session (Capitol Update)

The legislature appears to have made it through the 2022 regular session and a couple of special sessions without a large election-year tax cut. Legislators last week recessed the special session that they (the legislature) called to appropriate the federal funds allocated to Oklahoma by the American Rescue Plan Act (ARPA). Gov. Stitt repeatedly issued statements calling for them to amend their special session call and repeal the state sales tax on groceries, which the Oklahoma Tax Commission estimates would cost the state $325 million annually. 

• Oklahoma lawmakers should get serious about addressing inflation [OK Policy]
• Oklahomans need common-sense tax reform [OK Policy]
• A Better Path Forward: A Budget and Tax Roadmap for Oklahoma [OK Policy]

Stitt called for repeal of the grocery sales tax during the regular session, and when the legislature refused, he called his own special session demanding repeal. However, legislators adjourned the “Stitt” special session without acting. The House passed about $500 million in tax cuts, including the sales tax on groceries and cuts in the state income tax during the Stitt special session, but the Senate deferred, preferring instead to take a more deliberate approach to tax reform. 

There’s nothing new about calling for a repeal of the sales tax on groceries. Politicians have been doing it for at least 40 years, usually in election years. Ironically, during the regular 2022 session, the legislature repealed the 1.25 percent automobile sales tax, which would have been a $165.5 million tax cut, but the governor vetoed the tax cut saying it was not enough. Legislators also passed a one-year income tax rebate, estimated at $182 million, that the governor vetoed, calling it a gimmick. 

• Strengthening the Grocery Tax Credit would provide fiscally smart tax relief to working Oklahomans [OK Policy]
• The fiscally responsible way to reduce taxes on groceries [OK Policy]

Senate President Pro Tempore Greg Treat appointed a tax reform working group chaired by Sen. Dave Rader, R-Tulsa, to study various tax proposals. Treat said the Senate is committed to meaningful discussions on tax reform and has predicted probable tax cuts during the 2023 session. I’m not sure whether the working group will do much at this point, but Sen. Rader, as chair of the Senate Finance Committee, will play a large role in working through the tax issues next session. Look for him to take a fair-minded approach.