Small: Tax repeal must be priority

Tax repeal must be priority

By Jonathan Small

Now that this year’s elections have concluded, Republican caucuses have selected leadership in both chambers of the Oklahoma Legislature. State Rep. Kyle Hilbert of Bristow will serve as speaker of the Oklahoma House of Representatives while state Sen. Lonnie Paxton of Tuttle will serve as president pro tempore of the Senate.

As they prepare agendas for the 2025 legislative session, which starts in February, Republicans in both chambers must be prepared to tackle one of Oklahoma’s most pressing economic challenges – the state’s penalty on work.

Abundant research has shown, for many years, that the personal income tax has negative impact on economic growth. A tax on work and investment, by definition, means you get less work and investment than what would occur without the tax.

It is time to cut Oklahoma’s personal income tax and put it on the path to full repeal. Surrounding states have lower tax rates than Oklahoma, meaning our state is losing ground in the race for new job creation.

Oklahoma’s current top income-tax rate is 4.75 percent. But policymakers in Arkansas recently cut their top rate to 3.9 percent. Texas has long had no income tax. And Colorado has a 4.4-percent rate.

Fortunately, Senate lawmakers have indicated that tax cuts will be part of their agenda this year, and state Sen. Micheal Bergstrom, R-Adair, has already filed a bill to cut Oklahoma’s personal-income tax rate to 4.5 percent. That bill also provides for gradual repeal of the tax by enacting additional quarter-point reductions in any future year in which state revenue collections increase by $400 million or more.

That proposal should sound familiar to members of the Oklahoma House of Representatives, because Republicans in that chamber approved a similar plan this year that did not receive a final hearing in the Senate. 

The bill, which also raised the standard deduction and shifted Oklahoma to a true flat-tax rate, passed the Oklahoma House of Representatives on a 74-21 vote.

Having passed an income-tax repeal plan once, there’s no reason House lawmakers cannot do the same thing again, especially since it now appears Senate Republicans are on board.

Cutting and repealing the penalty on work contributes to economic growth and job creation, meaning it is good policy. But it’s also good politics. A recent survey, conducted by WPA Intelligence (WPAi) on behalf of the Oklahoma Council of Public Affairs and Americans for Prosperity, found that 65% of Oklahoma voters support cutting the state income tax, while only 22% oppose income-tax cuts. The survey also found that 67% of voters support elimination of Oklahoma’s penalty on work.

In 2024, Oklahoma lawmakers ended the session without addressing the economic challenges created by the personal income tax. But there’s reason to believe they’ll get the job done this year.

Jonathan Small serves as president of the Oklahoma Council of Public Affairs.