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February 28, 2014

Senate passes income tax cut with trigger

OKLAHOMA CITY — The earliest Oklahoma taxpayers could see a drop in the state’s top income tax rate would be 2016, and then only if certain revenue collections increase, under a bill approved on Thursday in the state Senate.

All of the eight Senate Democrats in attendance voted against the plan, with their leader calling it an election year ploy. The measure heads to the House, which is considering a separate tax-cut bill that also has a trigger tied to revenue growth. The governor has been pressing for an income tax cut for three years.

The Senate-approved plan, which passed on a 32-10 vote, would cut the top rate from 5.25 percent to 5 percent once certified collections to Oklahoma’s General Revenue Fund increase by at least $86 million. That amount would return the state’s main operating fund to where it was last year when the Legislature approved a similar tax cut that was tossed out by the Oklahoma Supreme Court.

“From a mathematical standpoint, we’re not only waiting a year to allow the tax cut to kick in, but we’re tying that delay to a benchmark certification to make sure the revenue is at the same level we were expecting last year,” said Sen. Mike Mazzei, R-Tulsa.

The bill includes a second trigger that would further reduce the rate to 4.85 percent once certain state collections increase enough to pay for the lost revenue.

A 0.25 percentage reduction in the state’s top rate would cost the state about $147 million annually, according to an analysis by the Oklahoma Tax Commission. The savings on the average Oklahoma tax return would be about $85.

Senate Democrats argued that it is foolish to pass a tax cut when legislators have no idea what the state’s revenue picture or financial obligations will look like in 2016.

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