OKLAHOMA CITY — Gov. Mary Fallin finally got the state personal income tax cut she's long wanted on Wednesday, courtesy of a narrow victory in the Oklahoma House of Representatives.
By a count of 54-40, with 51 votes needed for passage, the Republican-controlled House passed and sent to Fallin's desk Senate Bill 1246, which will lower the top state income tax rate from 5.25 percent to 4.85 percent in two stages over several years, provided the state's general revenue fund grows.
When fully implemented, the cut is expected to amount to more than $200 million a year.
Fallin has sought an income tax cut throughout her first term but has been thwarted despite Republican majorities in the House and Senate.
SB 1246 was no easy sell, either. Twelve Republicans joined all 28 voting Democrats in opposition to the bill. One of six Republicans to miss the roll call, Rep. John Bennett, R-Sallisaw, later asked that the House Journal reflect that he would have also voted no had he been present.
But Rep. Leslie Osborn, R-Mustang, was able to convince enough of her GOP colleagues that the tax cut would be "a beautiful opportunity" to stimulate the economy.
Osborn said criticism that most Oklahoma households would see little or no benefit from the reduction was a "class-envy argument" and missed the point of reducing income taxes.
Osborn and other supporters said the cut would put more money into circulation and encourage spending.
"I believe the benefits will go back to all Oklahomans equally," she said.
Democrats scoffed at the notion that cutting tax rates increases tax revenue. Minority Leader Scott Inman, D-Del City, conceded that state revenue is at an all-time high in nominal dollars but said it is $500 million less than six years ago when adjusted for inflation.
Inman and other Democrats said tax-cut advocates have tacitly admitted that they don't expect revenue to fully recover. The Democrats pointed to administration efforts to increase gross production taxes on some oil and gas wells and to blame lingering general fund shortages on tax incentives and inefficiency.
"Right now," Inman said, "there are discussions going on in this building to raise gross production taxes. Why is that happening? Because the governor knows that with income tax cuts like this, the only way they're going to get more money ... is to raise taxes on the oil and gas industry.
"So, business community, I'm looking at you right now. If you don't stand up and stop this crazy train right now, just wait, they'll come after your pocketbook soon."
SB 1246 will lower the top personal income tax rate from 5.25 percent to 5 percent in January 2016 if the general revenue projection for the budget year beginning in July 2016 exceeds general revenue for the current year.
Another revenue increase would trigger a further reduction to 4.85 percent.
Lower tax brackets will not be affected.
Whether by coincidence or design, the Senate unanimously passed a bill on Wednesday that would effectively reduce cash flows to the general revenue fund by directing an escalating amount of money to common education.
The result would be a tax cut, albeit a delayed one, and more money for education, but through a tactic — restricting general revenue — Fallin and legislative leaders have said they want to avoid.
The school funding bill still has to be heard again in the House, where it originated, and it is not known whether Fallin would go along with the plan.
Randy Krehbiel 918-581-8365