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Oklahoma Governor Proposes “Most Significant Tax Cut in State History”

1 min readBy: Alex Raut

During her February 6th State of the State address, Oklahoma Governor Mary Fallin (R) proposed a plan to reform the state’s income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. that she called “the most significant tax cut in state history.”

Oklahoma currently has seven different tax brackets. According to Tax Analysts (subscription required), Governor Fallin’s plan would simplify the code to two brackets: $15,000 to $35,000, and $35,000 and above. A single filer in the first bracket would pay 2.25%, and an individual in the second would pay 3.5%. Currently, the top rate is 5.25% for a single filer earning more than $8,700. The governor says that the lost revenue from the cuts will be made up “by eliminating tax loopholes, carve-outs, and other exceptions” and “by capitalizing on economic growth we expect to see as a result of our pro-jobs, pro-business policies.”

Kudos to the governor for pioneering this reform. Lower income tax rates can definitely help to spur economic activity. More disposable income could mean increased consumption and investment. Furthermore, Fallin’s plan would dramatically simplify the code, making for more efficiency, less administrative work, and less income-hiding.

Here is some information on neighboring states:

State

Top Rate for a Single Filer

Arkansas

7%

Kansas

6.45%

Louisiana

6%

New Mexico

4.90%

Colorado

4.63%

Oklahoma

3.50%

Texas

None

Besides Texas, which has no individual or corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. , Governor Fallin’s proposal would give Oklahoma the lowest individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. es in the region.

More information on Oklahoma here.

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