Income-tax cut proposal set
BY BARBARA HOBEROCK World Staff Writer & WAYNE GREENE World Senior Writer
Friday, May 18, 2012
5/18/12 at 7:09 AM
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OKLAHOMA CITY - Gov. Mary Fallin and Republican legislative leaders reached an agreement late Thursday to cut the state's top income tax rate to 4.8 percent from 5.25 percent.
The announcement came after a day of intense negotiations.
Under the agreement, the rate would drop to 4.8 percent for tax years 2013 and 2014.
If the state saw revenue growth of 5 percent in personal income tax, sales tax, use tax, motor vehicle tax and corporate tax collections, the rate would be further reduced to 4.5 percent in tax year 2015.
The proposal would eliminate 33 tax credits for a savings of $4.6 million. The credits are for things such as transportation of poultry litter and investment in film or music projects.
House Appropriations and Budget Committee Chairman Earl Sears, R-Bartlesville, said the Legislature will continue to attempt to eliminate additional credits.
The proposal drops the total number of tax brackets to three from seven.
New rates are to be set at 1 percent for a single person's first $2,500 of income and a married couple's first $5,000 of income.
The rate would go to 3.3 percent for single filers on their subsequent $5,000 in earnings and on married filers on their subsequent $10,000 in earnings. The 4.8 percent rate would apply to earnings over $7,501 for single filers and $15,001 for married filers.
The proposal would retain the full personal exemption of $1,000 per dependent on Oklahoma adjusted gross income for individuals making $35,000 or less and joint filers making $70,000 or less. The $1,000 exemption would be eliminated for those making above those levels.
The proposal would eliminate the deduction for state income or sales taxes included in a taxpayer's federal itemized deductions.
In fiscal year 2013, collections from personal income taxes would be reduced by $32.7 million. For fiscal year 2014, the figure would rise to $102 million. If the trigger is reached, it would cost an estimated $171 million.
Gov. Mary Fallin said a tax cut must be a priority this year.
The state has come out of a painful recession that has been hard on families and businesses, she said.
"We want to help our Oklahoma families," Fallin said.
The state has low unemployment and strong revenue growth, she said.
The state expects to have $350 million in growth revenue this year, she said, adding that some of it should be returned to taxpayers.
The proposal represents a significant tax cut to the people of Oklahoma, Fallin said.
House Speaker Kris Steele, R-Shawnee, said the measure would not jeopardize funding for core services.
Preston Doerflinger, Fallin's secretary of finance, said he did not know how many residents would see a tax cut and how many would see an increase.
Sen. Mike Mazzie, R-Tulsa, said a figure indicating on average how much a taxpayer would save as a result of the proposal was not available.
Fallin and lawmakers had to reach an agreement on a tax cut before the fiscal year 2013 budget could be finalized.
Senate Appropriations Committee Chairman Clark Jolley, R-Edmond, said a budget deal could be reached as soon as Friday or Saturday.
Lawmakers must adjourn by May 25.
"I feel confident a budget agreement will come quickly," Sears said.
Lawmakers say no deals have been reached on proposed bond issues.
Senate Minority Leader Sean Burrage, D-Claremore, said he has not had a chance to read the plan.
"At first blush, I have great concern about the loss of revenue of $38 million the first year and $102 million the second year," Burrage said "At this point, I have not heard anything about how we are going to pay for these tax cuts.
"When this discussion began, it was my understanding we would all strive to have a revenue plan, and obviously that is not the case with this tax plan."
Joint tax cut proposal
Original Print Headline: Income tax cut proposal set
- Drops the income tax rate to 4.8 percent from 5.25 percent for tax years 2013 and 2014
- Contains a trigger for an additional reduction to 4.5 percent in tax year 2015
- Wipes out 33 tax credits
- Reduces the tax brackets to three from seven
Barbara Hoberock 405-528-2465
Gov. Mary Fallin: She says the state has come out of a painful recession that was hard on families. "We want to help our Oklahoma families."