Pauls Valley, OK, Pauls Valley Democrat

February 2, 2012

Fallin: Oklahoma income tax plan to reduce brackets

Sean Murphy
AP-Associated Press

Oklahoma City, Oklahoma — Gov. Mary Fallin said Thursday that her plan to reduce Oklahoma's income tax will shrink the number of tax brackets from seven to three and will include revenue growth criteria to trigger future tax cuts.

Fallin touched on some highlights of her tax plan Thursday during a speech at The Associated Press' annual legislative forum.

"Our goal is to create a tax structure that is fairer, that is flatter, that is simpler to use, one that will help Oklahoma be more competitive as a state," Fallin said. "This tax plan will also be immediate and significant. It will start on Jan. 1, 2013, with immediate tax relief for ... a majority of Oklahoma citizens."

Fallin said she would release more details of her plan during her State of the State address Monday, but promised the tax plan would not be balanced on the "backs of the poor." She indicated that she would offset some of the lost revenue by removing what she described as tax loopholes, including some of the dozens of tax breaks and incentives that are included in the state's tax code.

"The majority of Oklahomans will receive a tax break, a tax cut, but we still have to provide for core, essential services, and I am not proposing that we starve state government or that we don't fund core services of our state," Fallin said. "I do not want to hurt the poor."

Oklahoma currently has seven tax brackets ranging from 0.5 percent for single taxpayers earning $1,000 or more in taxable income to the top rate of 5.25 percent on taxable income of more than $8,701. For most states with an individual income tax, the top tax rate is significantly higher than Oklahoma's, according to a state-by-state analysis by the Brookings Urban Tax Policy Center.

In neighboring Arkansas, the top rate of 7 percent applies to those earning $32,700 or more. In Kansas, the 6.45 percent top rate starts at $30,001. The top rate in New Jersey, New York and Maryland is $500,000.

Fallin said her ultimate goal is to gradually eliminate the state income tax by attaching future cuts to a revenue growth trigger, a mechanism similar to one that Republican lawmakers negotiated with Democratic Gov. Brad Henry several years ago.

"I believe this will be one of the boldest tax reform plans we've seen in our state's history," she said.

Democratic leaders in the House and Senate both have expressed willingness to support a reduction in the state income tax if there is a plan to offset the revenue and not negatively affect working families.

"Are we completely opposed to reducing the income tax? No, so long as it doesn't affect core services and as long as it's offset ... through a system that will not negatively affect jobs or working families in Oklahoma," said House Democratic Leader Scott Inman, D-Del City.

Inman said his caucus will oppose any effort to impose a plan developed by a task force led by state Sen. Mike Mazzei, R-Tulsa, that would offset a cut in the income tax by eliminating a number of tax breaks, including the child care tax credit and the personal exemption claimed by about 1.5 million Oklahoma tax filers each year.

"Those personal exemptions and those child care tax credits help working families that have to have child care so they can go out and earn a living and put food on their table," Inman said.

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Sean Murphy can be reached at www.twitter.com/apseanmurphy



Copyright 2012 The Associated Press.