OKPOLICY.ORG
Oklahomans, like many Americans, pay their taxes as a civic duty. Lawmakers are responsible for ensuring our tax dollars are used to meet our residents’ many needs. Oklahoma legislators are facing tough decisions concerning the Fiscal Year 2026, which starts on July 1, 2025. The legislature has about $300 million fewer dollars to appropriate compared to FY 2025; meanwhile, state agencies have said they need an extra $921 million in the coming year to deliver their services to the people of Oklahoma.
At the same time, recent revelations have arisen about a budget gap at the Oklahoma Department of Mental Health and Substance Abuse Services alongside potential federal cuts to Medicaid, SNAP, and other federal programs that will impact the state’s bottom line. These shortcomings could put Oklahoma on the hook for hundreds of millions of dollars that had not been on the legislature’s radar until the last few weeks.
With a challenging budget session ahead, this is not the time to shrink state revenue through poorly planned tax cuts that overpromise and underdeliver. Instead, legislators need to exercise fiscal responsibility with taxpayer dollars by prioritizing low- and middle-income Oklahomans in their fiscal decisions.
More significantly, they should shelve bills that automatically reduce the personal income tax rate when the state meets a revenue goal. These bills, known as trigger bills, do not prioritize everyday Oklahomans. Instead, trigger bills allow lawmakers to gain quick political clout while placing the harmful consequences on future lawmakers. (Which, due to term limits, may not include the lawmakers who approved the measures in the first place.) Automatic triggered tax cuts provide little to no financial relief for low- and middle-income families, jeopardize the state’s fiscal health, and limit investment in Oklahoma’s already underfunded public services.
While several triggered tax cut bills have been introduced this session, the one that is currently active for consideration is House Bill 1539. This bill would reduce the personal income tax rate by 0.25 percent every time the state’s revenue grows by $300 million cumulatively compared to a baseline year. That said, the idea of triggered tax cuts could also be introduced at any point as part of the state budget deliberations, which are currently ongoing behind closed doors.
Triggered tax cuts are a preferred vehicle for lawmakers to achieve the governor’s stated goal of eliminating the state’s income tax. But his so-called “path to zero” is a treacherous road.
Key takeaways
• Automatic tax cuts can trigger during economic downturns or other times when revenues are badly needed.
• In recent years, Oklahoma has twice enacted triggered tax cuts that have significantly threatened budget stability; lawmakers were subsequently forced to overturn those triggered cuts.
• Tax triggers enable policymakers to claim credit for cutting taxes while avoiding accountability for the consequences.
• Will Oklahoma have enough money to fix the important problems facing our communities, or will politicians risk our future by passing expensive tax cuts that most Oklahomans won’t even notice?
Legislators should heed caution from Oklahoma’s history of triggered tax cuts
Oklahoma has a long history of using triggered tax cuts, having enacted two tax triggers since 2006. The most recent example is from 2016, when a flawed trigger tax cut went into effect. When the trigger went into effect, it was based on revenue estimates from 2014, did not adjust for inflation or population growth, and cut the top tax rate by 0.15 percent (approximately $57 million) while the state faced a budget deficit of $900 million. Only five of the 148 current legislators in the House and Senate were in office during the implementation of the 2014 triggered cut; only 27 current members – fewer than 1 in 5 – were in office when lawmakers overturned the last tax trigger because of the enormous financial problems it created.
Those seasoned legislative veterans should remember agencies firing employees, consolidating public services, and reducing access to safety programs that helped Oklahomans buy food, get health care, and afford basic necessities. Those difficult times should be reason enough to avoid jeopardizing essential state revenue sources, especially through triggered tax cuts that happen automatically under certain conditions.
However, 2016 was not the first time Oklahoma experienced a triggered income tax cut that further reduced revenues during economic insecurity. In 2009, the legislature passed a triggered tax cut that took effect in 2012. It added anywhere from $75 million to $120 million shortfall to the preexisting $500 million budget hole. The $500 million budget hole had in turn been created by a decade-long tax cut spree starting in 2006 that significantly slashed revenue.
Lawmakers started cutting taxes in 2006 following a spike in revenue due to soaring oil prices. In a familiar echo, lawmakers today support their decision to cut taxes by pointing to a historic amount of money in state savings funds. Gov. Kevin Stitt has been pressuring legislators to use historically high state savings to fulfill his campaign promises about taxes.
However, as some legislators have rightly pointed out, the state’s Rainy Day Fund and other savings accounts are for unforeseen emergencies, like economic downturns, potential cuts to Medicaid, or possibly, purchasing a prison in Lawton. Fiscally responsible lawmakers know that savings accounts should be used for one-time purposes, not to subsidize tax cuts resulting in recurring revenue loss. What is certain is that tax cuts largely benefiting the wealthy are not a state emergency, but implementing a triggered tax cut could create one.
Triggered tax cuts taking effect during dire financial circumstances are not a uniquely Oklahoma problem: Kansas, North Carolina, Kentucky, Louisiana, and West Virginia have all implemented trigger tax cuts that reduced revenue and risked budget stability. Every single case reinforced the critical need for revenue to maintain core services for residents.
Triggered tax cuts put the government on autopilot
Triggered tax cuts are built to go into effect automatically, without any legislative action, as long as a specific revenue requirement is met. The state of Oklahoma passes a budget every year, evaluating the growing needs of agencies and appropriating funds accordingly. Then why would lawmakers choose to set the reduction of the state’s revenue collection on autopilot?
During its annual budget deliberations, the legislature decides how to spend taxpayer dollars on shared public services to meet the needs of Oklahomans. These discussions include accounting for how state needs will vary during changing economic conditions. Similarly, lawmakers should be monitoring how economic conditions are impacting revenue coming into the state and making adjustments accordingly each year. Oklahoma’s experiences show laws that predetermine a future tax rate cut – without consideration of economic conditions or other circumstances – will take needed funds from core services and directly harm the health and well-being of everyday Oklahomans.
The triggered tax cut bills proposed this session would put future Oklahoma legislators in a bind. Oklahoma already requires agencies to work with shrinking budgets amid growing inflation and a rising state population. When emergencies do arise, such as the state’s mental health agency lacking sufficient funding for the current fiscal year, one-time projects that bolster key initiatives for children’s health, and the state’s flagship veterinary program, or some other unforeseen circumstance, lawmakers need the funds and flexibility to address these critical issues. If the current legislature decides to implement yet another triggered tax cut, history has shown that it will compound the budget crises we can expect if the state faces a recession, a natural disaster, or continued fiscal uncertainty from federal cuts.
Triggered tax cuts let lawmakers take credit for tax cuts while ducking responsibility
Tax cuts are politically popular, even when they repeatedly fail to deliver on promised relief. Triggered tax cuts enable policymakers to take credit for fulfilling campaign promises while avoiding the consequences of structural disinvestment from lost revenue. Many lawmakers will have left office by the time these revenue cuts kick in, or they are counting on the public to forget who voted for the trigger in the first place.
The unpredictability of triggered tax cuts provides great political cover for lawmakers to avoid responsibility. Lawmakers themselves have stated during floor debate that no one knows when a triggered tax cut will actually take place. This unpredictability stems from the use of revenue estimates to trigger the tax cut. Although reliable for one-year state budget planning, these estimates do not guarantee revenue. State revenue projections are only for the coming year and do not provide multi-year outlooks. And they certainly cannot foresee an economic downturn, natural disaster, or other unexpected volatility in the state’s economy. Lawmakers rely on the fact that the timing of a tax cut is unknown to push this forward, insinuating there is no immediate harm while completely ignoring long-term impacts.
Oklahoma is no stranger to economic volatility, as state lawmakers have had to declare a revenue failure nine times in the last 25 years when state revenue failed to meet budget expectations. Trigger tax cut bills only compound Oklahoma’s already unstable fiscal circumstances because Oklahoma relies on volatile revenue sources (i.e., gross production tax on oil and gas). Add to the mix a lack of inflation and population adjustments to the trigger threshold and the state’s history of revenue reduction through tax cuts, and we’ll see that the state is likely to face revenue failures soon that will hurt everyday Oklahomans. The current legislators who approved these trigger cuts will remain politically unscathed, terming out after 12 years of service.
Make legislators put the needs of everyday Oklahomans above triggered tax cuts
Triggered tax cuts are a gimmick used by current legislators to gain political clout without having to make the tough financial decisions required of the offices to which they were elected. However, Oklahoma’s recent history and the experiences of other states show the harm triggered cuts inflict. This is the opposite of fiscally responsible stewardship of our tax dollars.
Let’s be clear, the choice is not between a tax cut or no tax cut. The real choice is whether Oklahoma will have enough money to fix the important problems facing our communities, or if politicians will risk our future by passing expensive tax cuts that most Oklahomans won’t even notice. Make your voices and choices heard by contacting your legislators today and asking them to vote against triggered tax cuts that benefit the wealthy over everyday Oklahomans. Ask them to protect the essential services our communities rely on – like public schools, health care, public safety, roads, and more.
