OKLAHOMA CITY (AP) -- Gov. Mary Fallin and Republican legislative leaders announced a plan Tuesday to cut Oklahoma's top personal income tax rate to 5 percent starting in January 2015, overhaul the workers' compensation system and set aside $120 million to repair the state Capitol.
Fallin, Senate President Pro Tem Brian Bingman and House Speaker T.W. Shannon unveiled the details of a broad agreement that also calls for an eight-year plan to pay for infrastructure improvements to state buildings and other properties.
The tax cut, a top priority for Fallin, would drop the top personal income tax rate from 5.25 percent to 5 percent, effective Jan. 1, 2015. A second cut would drop the rate further, to 4.85 percent, beginning Jan. 1, 2016, but only if state revenues grow by more than $40 million in fiscal year 2016.
If both reductions take effect, the cuts would reduce state income tax collections by an estimated $237 million annually when fully realized. The average Oklahoma taxpayer would save between $88 and $140 each year, depending on the exemptions that they claim, state finance officials projected.
Fallin said cutting the income tax sends a positive message to businesses and industries and ultimately will help grow the state's economy.
"I certainly think that the tax cut is a responsible tax cut," Fallin said. "It will not deprive the government of revenue and it will help support the different needs that we have in government services and things like education and other areas of government."
But the first .25 percent reduction will have an immediate $54 million impact in fiscal year 2015 and an additional $136 million when fully annualized. The second reduction of .15 percent, if it takes effect, would cost an additional $101 million annually.
Critics contend now is not the time to cut a key source of the state's revenue following deep cuts to the budget for public education in recent years and with the state still having to pay roughly $90 million to the oil and gas industry next fiscal year in the form of delayed tax incentives.
"The House Democrats believe the tax cut proposal that was put forth by the governor and Republican leaders today is fiscally irresponsible," said House Democratic Leader Scott Inman, D-Del City. "It's difficult for any legislative leader to predict what the economy in Oklahoma will look like in two months, let alone in a year and a half.
"But the governor and her leading Republicans have determined that the economy will be well enough to afford a more than $230 million tax cut."
Tuesday's announcement also includes an agreement on a plan to overhaul the state's workers' compensation system from the current court system to an administrative one, along with an "Oklahoma option" that would allow companies to provide their own workers' compensation coverage if they meet certain required standards.
The deal also includes a plan to set aside $60 million in the upcoming fiscal year and another $60 million in fiscal year 2015 to begin repairs on the state Capitol. The governor, Senate president pro tem and House speaker have stressed the need to repair the Capitol, but the increasingly conservative House has rejected the idea of issuing bonds to pay for the improvements.
Bright yellow barricades have been erected outside the Capitol to prevent pedestrian traffic from going near the front of the building, where chunks of limestone have been falling from its nearly 100-year-old crumbling facade. The building also has rotted pipes, crumbling walls and a patchwork of disorganized repairs. The state's Capitol architect has estimated the 400,000-square-foot building needs about $153 million in necessary repairs.
HB 2032: http://bit.ly/12r3SKc
SB 1062: http://bit.ly/13V0bl2
HB 1910: http://bit.ly/XUJxNj
Sean Murphy can be reached at www.twitter.com/apseanmurphy
- Budget, Tax & Economy
- Politics & Government
- Mary Fallin
- income tax