OKLAHOMA CITY – GOP legislators have filed two measures to eliminate the state income tax.
Sen. Michael Bergstrom (R-Adair), a state lawmaker for eight years, filed Senate Bill 1 to lower Oklahoma’s top income tax rate from 4.75% to 4.5%. His measure also proposes 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.
Across the Capitol Rotunda, state Rep. Jay Steagall (R-Yukon) filed House Bill 1009 to phase out the state’s personal and corporate income tax over a 10-year period, by 2035.
Steagall, who has served in the House of Representatives for six years, filed a similar measure, HB 3058, on Feb. 5, 2024. The next day the bill was assigned to the House Committee on Appropriations and Budget’s Revenue and Taxation Subcommittee, where it died without a hearing.
“Recent polls show that Oklahomans overwhelmingly support the elimination of the state income tax, an effort for which I have filed legislation in the past two years and filed once again for the 60th Legislature,” Steagall said. “The state income tax is a clear violation of our own state Constitution, and I will continue to pursue righting this wrong in the upcoming session.”
Steagall pointed to Article 2, Section 2 of the state Constitution, which declares “all persons have the inherent right to life, liberty, the pursuit of happiness, and the enjoyment of the gains of their own industry.” He said income taxes “go against the foundation” of the Constitution and “encroach on Oklahomans' liberties.”
Steagall said that the gradual reduction over a decade would give the Legislature ample opportunity to act on tax reform, a move he said is “much-needed.”
The state income tax was created statutorily in 1915, he said.
It also is authorized in the Oklahoma Constitution. Article 10, Section 12 of the Constitution, decrees: “The Legislature shall have power to provide for the levy and collection of license, franchise, gross revenue, excise, income, collateral and direct inheritance, legacy, and succession taxes; also graduated income taxes, graduated collateral and direct inheritance taxes, graduated legacy and succession taxes; also stamp, registration, production or other specific taxes.”
Texas has no state income tax, and according to the Oklahoma Council on Public Affairs policymakers in Arkansas cut that state’s top rate to 3.9%, and Colorado has a 4.4% rate.
State Capitol veterans remember what happened during Gov. Mary Fallin’s administration, when the Republican-dominated Legislature repeatedly lowered the income tax rate from 7.5% to 5%. This was achieved – despite warnings from Republican Treasurer Ken Miller – without a corresponding reduction in spending, deductions or exemptions, or an offsetting source of revenue.
Consequently, the state budget deficit started at $88 million but ballooned to $1.3 billion in year five.
Ultimately in 2018 the Legislature waved the white flag and voted for the state’s first tax increase in 28 years, since 1990. The $447 million tax package included an increase in the oil and gas production tax to 5%, tax hikes on cigarettes and motor fuel, and a cap on itemized deductions.
Both chambers of the Legislature had been unable to pass tax increases since Oklahoma voters approved a 1992 ballot initiative, State Question 640, which requires a three-fourths majority in both chambers to increase taxes.