During her February 6th State of the State address, Oklahoma Governor Mary Fallin (R) proposed a plan to reform the state’s income tax that she called “the most significant 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. cut in state history.”
Oklahoma currently has seven different tax bracketsA tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat. . 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 taxes in the region.
More information on Oklahoma here.
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