OKLAHOMA CITY — Gov. Mary Fallin and Republican legislative leaders announced a plan Tuesday to cut Oklahoma’s top personal income tax rate to 5 percent starting in January 2015, overhaul the workers’ compensation system and set aside $120 million to repair the state Capitol.
Fallin, Senate President Pro Tem Brian Bingman and House Speaker T.W. Shannon unveiled the details of a broad agreement that also calls for an eight-year plan to pay for infrastructure improvements to state buildings and other properties.
The tax cut, a top priority for Fallin, would drop the top personal income tax rate from 5.25 percent to 5 percent, effective Jan. 1, 2015.
A second cut would drop the rate further, to 4.85 percent, beginning Jan. 1, 2016, but only if state revenues grow by more than $40 million in fiscal year 2016.
If both reductions take effect, the cuts would reduce state income tax collections by an estimated $237 million annually when fully realized. The average Oklahoma taxpayer would save between $88 and $140 each year — depending on the exemptions they claim — state finance officials projected.
Fallin said cutting the income tax sends a positive message to businesses and industries and ultimately will help grow the state’s economy.
“I certainly think that the tax cut is a responsible tax cut,” Fallin said. “It will not deprive the government of revenue and it will help support the different needs that we have in government services and things like education and other areas of government.”
But the first .25 percent reduction will have an immediate $54 million impact in fiscal year 2015 and an additional $136 million when fully annualized. The second reduction of .15 percent, if it takes effect, would cost an additional $101 million annually.
Critics contend now is not the time to cut a key source of the state’s revenue following deep cuts to the budget for public education in recent years and with the state still having to pay roughly $90 million to the oil and gas industry next fiscal year in the form of delayed tax incentives.