MuskogeePhoenix.com, Muskogee, OK

May 14, 2013

Fallin signs income tax cut


Associated Press

— OKLAHOMA CITY (AP) — Gov. Mary Fallin signed a bill into law Monday that cuts Oklahoma’s top income tax rate to 5 percent in 2015 and provides $120 million for improvements to the state Capitol.

A top goal for the first-term Republican governor, the reductioni in the state’s income tax provides Fallin with a political victory more than two years in the making.

“We want to cut taxes responsibly,” Fallin said in a statement. “No one wants to starve state government of the resources it needs to fund priorities like education. The language of this tax cut bill was crafted in a way to ensure that we have enough growth revenue to pursue a significant tax cut.”

A more far-reaching plan unveiled by Fallin last year to deeply slash the income tax and offset much of the lost revenue by eliminating dozens of exemptions and credits fell apart in the waning days of the legislative session.

The new law reduces the state’s top income rate that most Oklahomans pay from 5.25 percent to 5 percent beginning Jan. 1, 2015, with a second cut to 4.85 percent set for 2016 if state revenues continue to rise. The initial drop in the top rate to 5 percent is expected to have a fiscal impact of about $136 million a year when in full effect, and the second reduction to 4.85 percent would bring the overall annual cost to $237 million, according to state finance officials.

The savings on the average Oklahoma tax return would be about $82 at 5 percent, and $143 at 4.85 percent, according to the Oklahoma Tax Commission.

The tax cut was opposed by Democrats and some Republicans, many of whom argued it is irresponsible to slash so much revenue from the state budget, especially because it’s impossible to know how the state’s economy will be performing nearly 20 months from now when the tax cut takes effect.

“We’re cutting revenues and we know that there will be several bills to pay down the road,” said Sen. Patrick Anderson, R-Enid, one of two Republicans who opposed the bill in the Senate. “We’ve got a higher education bond issue that will go on for 15 years. We’ve got common education needs.”

But Republican leaders have maintained that cutting taxes will encourage businesses and industries to move to or expand in Oklahoma, boost the state’s economy and ultimately lead to even greater revenue growth.

“The way you grow an economy is by letting hard working people keep more of their hard-earned money,” House Speaker T.W. Shannon, R-Lawton, said in a statement. “By lowering the income tax rate, we are attracting skilled and educated workers to our state and making Oklahoma a leader in business and economic growth.”

The new law also diverts $120 million in income tax revenue over the next two years to a fund set up to pay for improvements and repairs to the Capitol, which has yellow barricades erected outside the building to keep pedestrians from walking near where pieces of its limestone facade have crumbled from the building.

Some members argued that the separate provision in the new law could lead to a legal challenge because the state constitution requires bills to address only one subject.

Jerry Fent, an Oklahoma City attorney who has successfully challenged as unconstitutional several bills approved by the Legislature, vowed to file a legal challenge with the Oklahoma Supreme Court once the legislative session ends.

“I’ll file an application and petition to declare House Bill 2032 unconstitutional,” Fent told The Associated Press on Monday. “It’s a clear violation of the constitution.”