MuskogeePhoenix.com, Muskogee, OK

April 4, 2013

New income tax cut plan emerges in Oklahoma Senate


Associated Press

BOYNTON — OKLAHOMA CITY — Divisions between the House and Senate about how to slash Oklahoma's top personal income tax rate became clear Thursday when a new plan emerged in the Senate that would delay a tax cut until 2015 and change five separate tax credits the state offers.

Senate Finance Committee Chairman Sen. Mike Mazzei unveiled the new measure Thursday in his committee, where it easily passed on an 8-2, party-line vote with both Democrats on the panel opposing the measure.

The revised bill would cut the top income tax rate from 5.25 percent to 4.95 percent, beginning in 2015. It also would also eliminate the transferability of five separate tax credits for coal mining, wind power, rehabilitation of historic buildings, energy efficient home construction and railroad modernization. It differs significantly from a plan endorsed by House Speaker T.W. Shannon and Gov. Mary Fallin that would have cut the top rate from 5.25 percent to 5 percent, effective Jan. 1.

Shannon, R-Lawton, said he liked the idea of a deeper tax cut and addressing some tax credits, but he was clearly disappointed with the change to delay the cut until 2015, calling such a move a "travesty."

"I think that's a fundamental step in the wrong direction," Shannon said after being briefed on the changes. "We need to provide tax relief now, not delay it another year."

But Senate President Pro Tem Brian Bingman said delaying the cut until 2015 would provide enough time for the state to finish paying back tax subsidies to the oil and gas industry that amount to about $90 million annually and would be completed by 2015.

"That revenue would be available and help absorb the $170 million impact for the second year on the reduction of the income tax," said Bingman, R-Sapulpa.

A fiscal analysis of the revised bill shows it would result in $65.7 million in lost revenue to the state in fiscal year 2015 and $169 million in FY 2016 when fully implemented. Mazzei said the cut would result in savings of about $80 for the average Oklahoma family, or $40 for an individual taxpayer.

Fallin said in a statement that she's encouraged both the House and Senate appear to support the principle of tax reduction and urged both sides to reach an agreement and send a bill to her desk.

"I encourage our senators and representatives to be pragmatic in their negotiations and to remember that our ultimate goal is the same: to pass legislation that will help to create jobs and allow Oklahomans to keep more of their hard-earned money," Fallin said.

Senate Republicans have maintained that delaying the cut would allow legislative leaders to boost funding this year for some pressing state needs, most notably spending on public education.

Democrats, who are outnumbered in both the House and Senate, have been consistently opposed to any effort to reduce the income tax, claiming it takes away revenue needed to pay for critical state services like education, public safety and transportation.

"We believe investing in education does more to grow the economy than giving $40 back to an individual filer," said House Democratic Leader Rep. Scott Inman, D-Del City.

With less than eight weeks remaining before the end of the session, Inman said the growing divisions between the House and Senate could spell trouble for a tax cut plan, similar to what happened during the 2012 legislative session.

Last year, Fallin proposed a bold initiative to slash Oklahoma's top income tax rate from 5.25 percent to 3.5 percent, reduce the number of income tax brackets from seven to three, and offset much of the lost revenue by eliminating various deductions and exemptions. But that proposal fell apart in the waning days of the session after lawmakers balked at getting rid of popular deductions and couldn't agree on how the cut would be implemented.