OKLAHOMA CITY — Despite opposition from some Senate Republicans, Gov. Ken Stitt is optimistic state lawmakers will cut taxes this year.
Stitt on Friday said he thinks the House and Senate may agree to cut personal income tax rates by 0.25%, dropping the state’s highest tax rate to 4.5%.
“The House has passed several different tax cuts over to the Senate,” Stitt said. “The Senate has been very thoughtful on how they want to do it, but we’ve got some signals from them that they’re ready to move on a quarter-point tax cut. That would be a move in the right direction.”
In recent weeks, Stitt has pressured the Oklahoma Legislature to cut taxes and pass a comprehensive education package that includes teacher pay raises and tax credits for parents whose children attend private school.
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Senate President Pro Tem Greg Treat, R-Oklahoma City, said the two issues are inextricably linked because the cost of the education package, which could be as high as $800 million, could impact lawmakers’ ability to cut taxes.
Senate Republicans will consider any proposed tax cut so long as it’s sustainable in the long-term, Treat said.
The combined cost of new education investments and tax cuts need to come in “considerably” below the state’s $1.1 billion revenue surplus, Treat said.
“We are very focused on being good fiscal stewards for the state of Oklahoma,” Treat said of the Senate. “From my perspective, it appears that we’re the only ones concerned on that.”
Treat has previously said he wants to get the state’s personal income tax “as close to zero as possible.” But he’s also said lawmakers should take a methodical approach to cutting taxes in order to avoid state budget shortfalls.
Citing record state savings, Stitt has insisted the time is right for tax cuts. In his executive budget this year, Stitt proposed eliminating the state’s 4.5% grocery tax and cutting personal income and corporate income taxes. Altogether, the cuts would cost $656 million this year, but the price tag could nearly double once the cuts were fully annualized.
The governor has called for tax cuts since last year. The Senate resisted Stitt’s calls for tax cuts in a special legislative session last summer.
Reducing personal income taxes would help all Oklahomans, said House Speaker Charles McCall, R-Atoka.
He was optimistic that if the House and Senate can reach an agreement on education funding after weeks of gridlock, other key parts of the state budget will come together.
“Once we can get this education plan finalized, I believe the tax cut and economic development will fall into place,” he said.
McCall has said he wants the Legislature to cut taxes before it takes up economic development incentives for two companies that are considering locating major manufacturing operations in northeastern Oklahoma.
Citing personal and corporate income tax cuts that took effect last year, Sen. Dave Rader, R-Tulsa, said he’d prefer to wait another year to make additional cuts to ensure state revenue collections don’t dramatically decrease.
Rader, the chairman of a Senate working group on tax reform, said he’d rather the Legislature take a big-picture look at rewriting the state’s tax code instead of doing piecemeal tax cuts.
With just three weeks remaining in the legislative session and an education dispute still dominating budget negotiations, Rader said he’s unsure there’s time for lawmakers to have a thorough discussion on tax reform.
After having to vote in 2018 to raise taxes to offset a state budget shortfall, Rader said he never wants lawmakers to be in that same position again.
“It could be that we come down to it at the end of session, and we vote on a tax cut,” he said. “It could very well happen that we just say, ‘Let’s hold off a year.’”