With inflation remaining at a 40-year high, House Republicans advanced five new options the Legislature can choose from to provide tax relief to Oklahomans this session.
House Speaker Charles McCall, R-Atoka, said, “With President Biden’s policies driving inflation up and more states cutting taxes – especially income taxes – last year than any year since 1986, Oklahoma must stay vigilant on tax relief. The options in these bills allow Oklahoma to aggressively fight inflation and continue competing economically while protecting its strong state budget.”
The tax relief options are:
- One-time income tax rebate of $125 for individuals and $250 for households
- Permanent income tax rate reduction of .25%
- Two-year grocery sales tax suspension
- Two-year enhancement of the grocery sales tax credit for low-income Oklahomans
- Eight-year phaseout of the corporate income tax
They claim option should have no negative impact on the appropriated budget in the short or long term thanks to the way each is structured and current surplus revenue levels, according to legislators.
Income tax options
One-time rebate: Oklahomans who filed a state income tax return in 2021 would receive a one-time tax rebate of $125 for individuals and $250 for households this year under House Bill 1358. The estimated $321 million cost of the rebates would be paid for out of surplus state revenues.
” Revenues and reserves are at all-time highs, more than $1 billion in certified, one-time surplus funds exists, annual General Revenue Fund collections are 21% above estimates, and oil is over $100 a barrel,” McCall said.
Permanent tax cut: A .25% reduction to all personal income tax brackets would reducee the top personal income tax rate from 4.75% to 4.5%, saving the average taxpayer $121 per year, according to the Oklahoma Tax Commission.
Oklahoma’s personal income tax rate would move from 9th to 7th-lowest nationally under the bill, according to the Tax Foundation. The estimated $226 million cost of the reduction is expected to be outweighed by state revenue growth, as has been the case with the past 25 years of state income tax reductions in Oklahoma. As Oklahoma’s personal income tax rate dropped from 7% in 1997 to 4.75% this year, state income tax collections rose from $1.7 billion to $3.7 billion during that time.
Grocery tax options
Two-year rate suspension: The 4.5% state grocery sales tax would be temporarily suspended for all taxpayers for two years.
Two-year credit enhancement: An enhancement of the state’s existing grocery sales tax credit for low-income Oklahomans would be offered for two years and would increase the grocery sales tax credit to up to $180 a year for low-income residents, at an estimated cost of $185 million a year.
Corporate income tax cut
Oklahoma’s corporate income tax would be largely phased out over eight years under HB 4358, by Rep. Jeff Boatman, R-Tulsa. Boatman’s bill would also give businesses with accrued corporate income tax credits time to utilize those credits without harming multiyear business plans.
The estimated $35 million annual cost until phaseout should be outweighed by increased economic activity, resulting in no budgetary impact, Boatman said.
The bills advanced from the House Rules Committee last Thursday. Their next step is a hearing on the House floor.