OKLAHOMA CITY – Oklahoma leaders have approved a measure that would give a tax cut to the wealthiest Oklahomans.
According to the memorandum, Senate Bill 1246 would reduce the top individual income tax rate beginning in 2016, if certain revenue standards are met.
Currently, the wealthiest Oklahomans pay 5.25 percent in income taxes.
However, the bill reduces that tax rate to 5 percent beginning in 2016 if certain revenue markers are met.
The memorandum says for that happen, the State Board of Equalization would have to find at the December 2014 meeting that the total General Revenue Fund estimate for fiscal year 2016 is equal to or greater than the total General Revenue Fund estimate for fiscal year 2014.
If the General Revenue Fund estimate for 2016 is less than the total General Revenue Fund in 2014, the tax rate would stay the same.
On Thursday, the board approved the state revenue projection, which set the tax cut into effect.
The bill would also allow the tax rate to continue to drop to 4.85 percent for subsequent tax years.
The memorandum estimates the state would lose an estimated $142 million in 2016 and $153 million in 2017, assuming the top income tax rate is dropped to 5 percent.
It also estimates the state would lose $266 million in 2018 if the top income tax rate is dropped to 4.85 percent.
Currently, the Oklahoma tax bracket is as follows:
- For earnings up to $1,000 of taxable income – residents pay .5 percent.
- For earnings between $1,000 and $2,500 of taxable income – residents pay 1 percent.
- For earnings between $2,500 and $3,750 of taxable income – residents pay 2 percent.
- For earnings between $3,750 and $4,900 of taxable income- residents pay 3 percent.
- For earnings between $4,900 and $7,200 of taxable income – residents pay 4 percent.
- For earnings between $7,200 and $8,700 of taxable income – residents pay 5 percent.
- For earnings over $8,700 of taxable income – residents pay 5.25 percent.
According to the Institute on Taxation and Economic Policy, the tax breaks would equal out to $9 for those who make between $19,500 and $36,400.
It would also give $30 back to individuals making between $36,400 and $58,100.
An additional $81 would go in the pockets of those who make between $58,100 and $97,700.
The tax break would give $169 to those who make between $97,700 and $190,900; and $362 would end up in the hands of those who earn between $190,900 and $433,200.
“I am pleased to know that Oklahomans will get to keep more of their hard-earned money through a much deserved tax cut that will put more money into our economy,” said Oklahoma House Speaker Jeffrey Hickman.
However, not everyone is pleased by the decision.
The Oklahoma Policy Institute Executive Director David Blatt released the following statement:
“It is supremely irresponsible to move forward with an income tax cut that will do little to nothing for most Oklahoma families at the same time as we face a nearly $300 million budget shortfall for next year. Under this tax cut, 41 percent of Oklahomans will not see any tax reduction, and the average tax cut for middle-income families will be just $30,” Blatt said. “Between repeated tax cuts and ballooning tax breaks for businesses, Oklahoma has gutted services crucial for a good education system, public safety, and a strong economy. With the collapse of gas prices and a continuing drought threatening two of our state’s major industries, now is exactly the wrong time to increase the size of our budget hole with a tax giveaway that will go mostly to the already wealthy.
“Going forward, Oklahoma urgently needs to review and rein in unnecessary tax breaks, and lawmakers’ needs to develop a more honest and transparent budget that funds core services by finding responsible revenue options, not one-time revenues and budget gimmicks,” Blatt added.
Hickman says that the tax breaks should happen while the economy is strong.
“The Oklahoma economy is stable, and I am hopeful the current geopolitical circumstances that are driving down the price of oil are temporary,” said Hickman. “Even though our economy is strong, all entities which receive state tax dollars should be making preparations now in their current budgets for fewer dollars in next year’s budget, just like Oklahoma families and businesses do every day.”