Oklahoma‘s tax system ranks 21st overall on the 2025 State Tax Competitiveness Index. In recent years, Oklahoma lawmakers have adopted several structural reforms, including eliminating the income tax’s marriage penalty and repealing a capital stock tax. However, the state’s individual income tax code features six brackets and is not indexed for inflation. This leaves taxpayers vulnerable to bracket creep, which occurs when inflation pushes a taxpayer from a lower bracket to a higher one when nominal income rises, but due to inflation, real income does not, or may even decline.
Oklahoma’s property taxes are relatively low, and the state has benefited from the repeal of the capital stock tax. Capital stock taxes are imposed on a business’s net worth (or accumulated wealth) and tend to penalize investment. Moreover, businesses are required to pay the capital stock tax regardless of profitability. However, the state continues to tax business inventory, which is also levied regardless of profitability. Such taxes are nonneutral and disproportionately affect those businesses with larger inventories, causing taxpayers to make inefficient timing and location decisions with their inventory.
Oklahoma was the first state to adopt permanent first-year full expensing for qualifying investments in machinery and equipment. This boosted the state’s competitiveness, particularly as the federal provision began to phase out. Those states that continue to conform to the federal provision are less competitive in this regard.
Oklahoma has a single corporate tax rate at 4 percent; however, the state does not conform to federal depletion rules, which is like depreciation but applies to natural resources. The corporate code also features some nonneutral incentive credits for jobs and investment. The state’s throwback rule is inefficient and taxes “nowhere income” in the state from which sales are made because the seller lacks sufficient nexus to be taxed in the destination state, leading to taxation in the wrong state at the wrong rate.
Summer has arrived, and states are beginning to implement policy changes that were enacted during this year’s legislative session (or that have delayed effective dates or are being phased in over time).
The vaping industry has grown rapidly in recent decades, becoming a well-established product category and a viable alternative to cigarettes for those trying to quit smoking. US states levy a variety of tax structures on vaping products.
In the United States, taxes are the single most expensive ingredient in beer. The tax burden accounts for more of the final price of beer than labor and materials combined—the many different layers of applicable taxes combining to total as much as 40.8 percent of the retail price.