A Senate bill dedicated to lowering the state income tax was approved Monday and will move to the House of Representatives for further consideration.
Senate Bill 585 would lower the current rate of 5.25 percent to 4.75 percent. Sen. Frank Simpson (R-Ardmore) voted for the bill, which was procedural in nature, as it did not have a title.
“In the legislative process, in order for a bill to become a law, it needs a title and an enacting clause and this has neither,” Simpson said. “It will come back and we will see it again.” Simpson touted the bill in its current form, as it will be revenue neutral. To offset the loss of tax money, 30 tax subsidies have been targeted for elimination or reform, according to a press release from the Senate. It will also protect most tax preferences for low-income individuals, senior citizens and members of the military.
The bill, which passed 33-13, would cut income taxes by an estimated $250 million and nine of 10 Oklahomans would see no change or lower taxes.
“Because of those reforms, our tax cut legislation not only protects resources for education, but actually will result in additional funding,” Sen. Rick Brinkley, (R-Owasso) said. “This approach is critical to overall efforts to make our state a place that will attract companies offering high-paying jobs. It’s a winning proposal for all of Oklahoma.” Simpson said as the bill stands he will vote for it, but will reserve final judgment before deciding toapprove the bill. 'I like the format,' Simpson said. 'It takes away some ofthe tax credits to a limited number of people and nearly everybody will be able to receive the benefit. As it is written, it would be revenue neutral.' The bill will move to committee in the House and floor debate where it can be amended before coming back to the Senate. The House also has a bill to cut the income tax and Simpson said both bills would be reconciled before final vote.
The proposal would reduce state revenue collections by about $43.5 million in fiscal year 2015 and $108.7 million when fully implemented in fiscal year 2016, according to a fiscal analysis by the Oklahoma Tax Commission.
The bill would eliminate more than two dozen tax deductions taken by businesses and industry, including credits for the sale of national landmarks, employer-provided child care, hepatitis immunizations for employees, and electric motor vehicle manufacturers.
The measure also modifies or eliminates several individual taxpayer deductions, including a child-care tax credit, which will be limited to those with incomes under $50,000 and the personal exemption, which would be restricted to taxpayers with lower incomes and larger families. The personal exemption restriction would no longer be allowed for any taxpayer who can claim less than four personal exemptions, and for single individuals who earn less than $35,000, a change that is expected to save the state nearly $440 million.
The Senate tax cut plan is markedly different than those being proposed by Gov. Mary Fallin and Republicans in the House. The governor's proposal, mirrored in House bills sponsored by House Speaker T.W. Shannon and House Appropriations Committee Chairman Rep. Scott Martin, would slash the top rate from 5.25 percent to 5 percent, beginning in 2014, without any offsets in revenue. That proposal would cost the state about $120 million when fully implemented.
If approved, the bill would become effective in 2015.