Oklahoma House Approves Governor's Income Tax Plan
A pair of sweeping proposals to deeply slash and eventually eliminate the state's personal income tax cleared the Oklahoma House on Wednesday, even as GOP state leaders acknowledged there's no consensus on what a final plan would look like.
The House approved two separate bills, including Gov. Mary Fallin's plan that would cut the top income tax rate from 5.25 percent to 3.5 percent and shrink the number of income tax brackets from seven to three. On Tuesday, the House passed one based on a study by conservative economist Art Laffer that would completely eliminate the income tax by 2022. The Senate has passed two other measures.
Rep. Earl Sears, the chairman of the powerful House Appropriations Committee, said it's too early to tell exactly what kind of plan will emerge before the legislative session is scheduled to end in May.
"All these bills are a work in progress, every one of them," said Sears, R-Bartlesville. "We'll hammer out a deal."
"The train has left the station, and at the end of the day, there will be an income tax cut for Oklahoma and the taxpayers," he said.
Each proposal relies heavily on offsetting the lost revenue by getting rid of numerous deductions and exemptions such as retirement income and savings for college. The proposals also do away with a $1,000 personal exemption claimed by more than 1.5 million tax filers. Opposition to eliminating exemptions is growing, and Republicans already are caving to pressure from groups representing seniors to keep the deductions for retirement income and Social Security benefits.
House Speaker Kris Steele has referred to the governor's measure several times as a "work in progress" and agreed to amendments that restored exemptions for retirees and military personnel as well as contributions to college savings plans.
On Wednesday, Fallin spokesman Alex Weintz said the governor knows the restoration of exemptions are "part of the legislative give-and-take."
"We're confident that the final product of this debate will be a tax plan that meets the governor's primary goals," Weintz said.
Democratic lawmakers bitterly oppose all of the tax plans. They maintain that the cuts will benefit wealthy taxpayers at the expense of the poor and working class and will decimate funding for core government services.
Oklahoma's personal income tax accounts for about one-third of money the Legislature appropriates each year, or about $1.9 billion for the upcoming fiscal year.
"It's good for those people who have slick-suited lobbyists out front," said House Democratic Leader Rep. Scott Inman of Del City. "It's not good for the people who we were sent up here to represent. You're fooling yourselves.
"It costs money to build a road. It costs money to educate a child. It costs money to pay for health care ... and take care of senior citizens," he said.
Some Democrats argue it's disingenuous for GOP leaders to suggest cutting taxes won't jeopardize core state services.
During debate on the bill Wednesday, Rep. Richard Morrissette, D-Oklahoma City, took on Steele.
"This is a bill that's built by smoke and mirrors, and you know it," Morrissette said, "It's voodoo economics."