State House passes 10-year income tax phase-out

Oklahoma House approves 10-year income tax phase-out 

OKLAHOMA CITY (March 15, 2012) – The Oklahoma House of Representatives has approved a proposal to phase out the state’s personal income tax over 10 years.

Supporters said House Bill 3038 would set Oklahoma on a path toward vibrant, long-term prosperity and robust job growth for generations to come.

“By allowing people to enjoy more of the fruits of their labor, we give people more reasons to work, invest, save and produce at a higher level, leading to a stronger economy for our state as a whole,” said state Rep. Leslie Osborn, one of over two dozen authors of the legislation.

State Rep. David Brumbaugh, also an author of the bill, said, “Those states with the lowest tax burdens and no income taxes consistently outperform the national average and us here in Oklahoma in terms of economic growth, job growth, population growth, and even state and local revenue growth. We need to replicate their success here in our state.”

HB 3038 would repeal Oklahoma’s progressive personal income tax without necessitating increases in other tax rates or cuts in funding to core government services.

Were Oklahoma to eliminate its personal income tax without raising or expanding any other tax rates, the state would have the lowest overall tax burden in the continental United States.

“This would be a game-changer for our state’s economy,” Osborn said. “Oklahoma should have the best climate for business and jobs of any state in America. The status quo is simply not good enough to keep many of our kids and grandkids here.”

Pointing to tax climates in neighboring states, Osborn said, “Texas already doesn’t have an income tax. Kansas and Missouri are actively looking to get rid of theirs. We have the opportunity to be part of an economic corridor that the job creators who are leaving the high-tax, high-regulation states flee to as they pursue profits and prosperity and bring jobs with them.”

On the floor of the House, Osborn quoted from a Feb 7 editorial from the Wall Street Journal, titled “The Heartland Tax Rebellion,” which said, “(t)he tax competition in America’s heartland is an encouraging sign that at least some U.S. politicians understand that they can’t take prosperity for granted. It must be nurtured with good policy, as they compete for jobs and investment with other states and the rest of the world.”

HB 3038 would phase out the state personal income tax through a process of simplifying the tax code, making modest reductions in wasteful, inefficient and nonessential state spending at the outset of the phase-out process, and utilizing growth revenue from other sources as Oklahoma’s private sector grows in response to the state’s dramatically improved tax climate.

“Money is spent more efficiently by the private sector than by government,” Brumbaugh said. “We need to put more money in people’s pockets.”

The measure was amended on the House floor today to ensure it would not raise effective tax burden on Oklahoma senior citizens, retirees and veterans.

The amendment allows individuals who currently claim exemptions or deductions on their state individual income taxes for Social Security income or any type of retirement income to continue to do so, as long as their household income is below a certain threshold. Above that threshold, seniors, retirees and veterans would already break even or pay less in taxes under the provisions of HB 3038.