OK Income Tax Reform: Will Oklahoma Move Forward With Cuts Promised in 2014?
Among states that levy income tax, Oklahoma is relatively low, with a top rate of 5.25 percent. However, Governor Mary Fallin signed reform measures in 2014 that may drop the OK income tax even lower, to 4.85 percent, if the state moves forward with this plan.
In her 2015 State of the State address, Fallin referenced growing Oklahoma’s economy and identified ways the state could balance its budget to maximize revenue from total tax receipts. She talked about improving quality of life for Oklahoma residents by making sure they receive the education they need to succeed, discussed personal and community safety, and identified the need for solutions to reduce drug abuse. Fallin failed, however, to mention any changes to the personal income tax rate, despite the bill she signed last year. Here’s a closer look at what’s happening with the state’s income tax reform.
A Relatively Low Tax Burden
In his January 2015 Oklahoma Economic Report, State Treasurer Ken Miller provided data revealing that with a per capita income growth rate of 20.1 percent from 2009 to 2013, Oklahoma is performing much better economically than its six neighboring states. This rate is also higher than each state with zero income tax (including New Hampshire and Tennessee, which charge tax on interest and dividends), suggesting that Oklahoma may not be in great need of tax cuts right now.
The 2015 edition of Rich States, Poor States, published by the American Legislative Exchange Council (ALEC), also reveals that Oklahoma is doing well economically. The report gives the Sooner State an excellent economic performance ranking of four. However, the top marginal personal income tax rate is ranked at 22 out of 50, and the economic outlook for the state is predicted to drop to number 16. When comparing nearby states, Kansas’s economic performance is worse, at number 28, while its top income tax rate is better than Oklahoma’s with a ranking of 15. Texas ranks number one for both its economic performance and its top marginal personal income tax rate. These statistics show that Oklahoma’s tax system has room for improvement, regardless of the Oklahoma Economic Report’s findings.
What Oklahomans Can Expect in the Coming Years
Oklahoma was among 14 states that signed tax cut legislation in 2014, according to ALEC’s 2014 State Tax Cut Roundup. This translates to more economic benefits for residents and may reduce the overall tax burden over the coming years, regardless of where OK income tax rates currently stand.
If Oklahoma continues to do well and see its revenues rise, the tax legislation Fallin signed in April 2014 should move forward. Assuming these tax cuts take full effect by 2018, the Oklahoma Tax Commission estimates that Oklahomans could see more than $200 million returned to their pockets each year. This, in turn, should trigger greater economic activity to offset lost revenues.
Fallin has yet to disclose any definite changes to the personal income tax rate, but in the meantime, residents may be able to enjoy other benefits from her reform plan, such as safer neighborhoods and more educational opportunities.