OKLAHOMA CITY – Legislators were tasked this session to help fulfill one of Gov. Kevin Stitt’s top priorities – tax cuts – and they responded by filing close to 200 bills on taxation.
On opening day of the current legislative session, Feb. 3, Stitt outlined his agenda and a tax cut plan called “Half and a Path” to achieve his goal of reducing the state’s individual and business income tax. It calls for a half-point cut from the top 4.75% rate and then establishing an ongoing path to zero income tax.
“States all around us – Nebraska, Missouri, Arkansas, Colorado and Louisiana – are cutting their income taxes and have lower rates than we do. If we don’t act quickly, we are going to be left behind and we’ll be considered a high tax state,” he said in his State of the State address to the Legislature. The governor also mentioned Texas and Florida in his speech, noting that neither have income tax.
The following is a general look at taxes in these states.
First, Florida is one of several U.S. states with no income tax. According to a Florida Tax Guide at kiplinger. com, the statewide sales tax is 6% and localities can add as much as 2%. The average combined rate is 7.002%. Groceries are tax-exempt.
Information from the Oklahoma Tax Commission shows that state sales tax is levied at 4.5%. Last year, the state’s share of tax on groceries was eliminated. Counties may levy a 2% tax and cities and towns may levy sales taxes in any amounts as long as voters approve. City rates range up to 5%, according to okpolicy. org. The average combined rate is 8.77%, reported taxrates. org.
In addition, Florida does have a corporate income/ franchise tax that is “imposed on all corporations for the privilege of conducting business, deriving income or existing within Florida,” according to floridarevenue. com. In 2023, Oklahoma eliminated the franchise tax.
When it comes to property tax, Florida Governor Ron DeSantis recently said he is in favor of eliminating it, which, on average, is at a .82% rate. Florida lawmakers are considering a proposal to consider the financial impact of not collecting property taxes. One solution proposed to offset the loss of revenue is to raise the sales tax.
Oklahoma’s property taxes are among the lowest in the nation at .85%, according to okpolicy.org, and, as the same in most states, only local governments and school districts use the property tax.
Texas is the only neighboring state to Oklahoma that does not collect personal income tax, but does have a franchise tax of .375% on retail or wholesale. As for local property taxes, Texas is reported to be among the highest in the nation at 1.47%, according to taxfoundation. org. There is a 6.25% state sales tax rate and an average combined state and local sales tax rate of 8.2% and does not tax groceries.
So, in comparison, although Florida and Texas have no state income tax, both have higher state sales tax rates compared to Oklahoma and both have franchise taxes, which Oklahoma does not. And, again, Oklahoma’s property taxes are among the lowest in the nation.
How about the other neighboring states of Arkansas, Colorado, Kansas, New Mexico and Missouri?
Arkansas has a graduated state individual income tax, with rates ranging from 2% to 4.40%, according to taxfoundation. org. It also has a graduated corporate income tax, with rates up to 4.8%. There is a 6.5% state sales tax rate and an average combined state and local sales tax rate of 9.45%. In Arkansas, the sales tax on groceries is reduced to .125%. According to kiplinger. com, this is the lowest tax rate of the states that tax groceries and accounts for about $10 million in annual revenue.
Colorado taxes individual and corporate income at a flat rate of 4.25%. However, according to taxfoundation. org, individual taxpayers are subject to an alternate minimum tax. This requires some taxpayers to calculate their liability twice – first under ordinary income tax rules and then under the alternate minimum tax – and pay the highest amount.
In addition, Colorado has the lowest statewide sales tax rate at 2.77%; however, there are other taxes on what is called “nowhere income” and global intangible low-taxed income (GILTI). Nowhere income occurs when a company is not subject to a corporate income tax in one of the states into which it makes sales. GILTI is a minimum tax targeted at foreign earnings from intangible assets like copyrights, patents, trademarks, etc.
Local jurisdictions add an average of 4.91% in local sales taxes. Property taxes are low, though state and local property tax collections per capita remain high, according to taxfoundation.org. There is no franchise tax, but does levy a corporate income tax. Groceries are exempt from state sales tax.
Kansas is at or above the national median in corporate and income tax rates, as well as its combined state and average local sales rate, according to taxfoundation. org. The state sales tax is 6.5% and has an average combined state and local sales tax rate of 8.65%.
There is not a franchise tax and, as of January 2025, does not tax groceries. As for property tax, the split roll ratio is fairly high, with commercial properties bearing a higher share of the property tax burden compared to residential properties.
New Mexico has a graduated state individual income tax with a top rate of 5.9%, according to taxfoundation.org. A franchise tax is in place and the corporate tax rate is also graduated, with rates ranging up to 5.9%. There is a 4.875 percent tax on sales, with an averaged combined state and local rate of 7.62%.
Like Colorado, New Mexico also taxes “nowhere income,” which is explained above. Most unprepared food items for home consumption are exempt from state sales tax.
Missouri has a graduated state individual income tax, with the top rate at 4.80%. In addition, some jurisdictions also collect local income taxes, according to taxfoundation. org. There is also a corporate income tax rate of 4% in addition to a franchise tax.
The state sales tax rate is 4.22% and an average combined state and local sales tax rate of 8.39%. There is a .82% effective property tax rate on owner-occupied housing value. Groceries are taxed at a statewide reduced sales tax rate of 1.225%.
As for 2025, taxfoundation. org compiled a list of states and assigned a ranking for state tax competitiveness. Of the 50 states and the District of Columbia, Oklahoma ranks No. 21 overall. This compares to Arkansas, No. 36; Colorado, No. 32; Kansas, No. 25; Missouri, No. 13; New Mexico, No. 31; and Texas, No. 7. Florida, although not a neighboring state, was mentioned in Stitt’s speech and is ranked No. 4.
Oklahoma is not a Top 10 state currently in tax competitiveness, but if the governor is able to reach his goal, it will be soon.