Legislation that would put Oklahoma’s personal income tax on a gradual path to full repeal is now headed to the floor of the Oklahoma House of Representatives.

House Bill 1539, by state Rep. Mark Lepak, R-Claremore, would cut the state’s personal income-tax rate by a quarter point each time that net state revenue increases by at least $300 million.

Lepak said lowering the state income tax is key to growing Oklahoma’s economy in the future, which in turn produces funding for the government.

“It incents or disincents the things that drive economic growth,” Lepak said. “When you drive economic growth, you drive jobs. When you drive jobs, then everybody makes more money.”

Oklahoma’s top personal income-tax rate is 4.75 percent. Because state revenue is down slightly this year, the passage of HB 1539 would not have any immediate impact on tax rates, but it would mandate future tax cuts once growth resumes at sufficient levels.

Lepak stressed that Oklahoma’s state tax rate does not exist in isolation and businesses look at numerous states when deciding where to operate.

“This is also a horse race with other states,” Lepak said. “Over two dozen states have cut their income taxes. We are falling behind if we do nothing. It’s a competitive advantage for the other states.”

Oklahoma’s current 4.75 percent personal income tax rate is among the highest in the region.

Texas has no personal income tax while Colorado imposes a 4.4 percent rate most years and recently provided a temporary reduction to 4.25 percent. Officials in Arkansas have cut their rate to 3.9 percent. The top rate in Missouri fell to 4.7 percent in January, leapfrogging Oklahoma. Louisiana has cut its income-tax rate to 3 percent and has a “trigger” law in place to further cut the rate as revenue increases in future years.

Among bordering states, Kansas and New Mexico have higher personal income-tax rates than Oklahoma.

Lepak also noted the long-term trend for Oklahoma’s tax collections has been one of strong growth, despite occasional disruptions.

“If you look over time and go back 30 years, state and total collections, all in, have increased over 4 percent a year annually through the entire 30-year cycle,” Lepak said.

However, he noted those tax collections have also grown faster than inflation and population growth in Oklahoma.

“That’s unsustainable,” Lepak said.

Democrat lawmakers objected.

“I think that we run government pretty lean,” said state Rep. Forrest Bennett, D-Oklahoma City.

Bennett argued that a four-percent average annual tax-collection increase “may not be enough.”

Democrats also objected to providing for future tax cuts when revenue surges, suggesting that the revenue shortfalls experienced from 2016 to 2018 were the result of prior income-tax reductions.

But Lepak noted the cause of those shortfalls was not related to tax policy, but instead economic conditions at the time. He pointed out that Saudi Arabia flooded the oil market at that time and caused oil prices to plummet, producing a major bust in the energy economy of Oklahoma.

“What affected the economy was the loss of the activity in the oil patch and the 100,000-or-so people that lost their jobs and the companies that decided to move where it was less costly to do business with those jobs,” Lepak said. “That’s what hurt the economy more than anything.”

Claims that tax increases approved in 2018 produced subsequent prosperity are disproved by state history, he said.

For example, the state of Oklahoma experienced a major downturn during the Great Recession of 2008 to 2010, but officials did not increase state taxes at that point. Government tax collections subsequently returned to pre-recession norms and have grown well above them since.

“There was no thing we did to increase taxes during that time frame,” Lepak said, “and yet we came back.”

HB 1539 passed the House Appropriations and Budget Committee on a 25-6 vote that broke along party lines with Republicans in support and Democrats opposed. HB 1539 previously passed out of the House Appropriations and Budget Finance Subcommittee on a 7-2 vote.

The legislation now proceeds to the floor of the Oklahoma House of Representatives.