Budget & Tax

Oklahoma income-tax phaseout kicks in

January 13, 2026

Curtis Shelton

As of January 1, the first phase of Oklahoma’s income-tax reform is now in place. The state has moved from six brackets to three, lowering the top rate from 4.75% to 4.5% and trimming the remaining brackets by a quarter point each.

The changes arrive during a period of steady revenues with modest growth, according to the latest reports from the State Treasurer.

FY 2025 saw $16.9 billion in total revenue collections, a 0.2 percent increase from FY 2024. Halfway through FY 2026, that growth has ticked up to $300 million in year-over-year revenue growth. Because the tax cut is just now going into effect, it is possible the next six months could see slightly less growth than the previous six.

The December Board of Equalization documents showed similar trends, estimating recurring revenue would increase by 3 percent or $338 million for FY 2026. While revenue is up, cash reserves have declined by $919 million as the Legislature chose to spend on a variety of one-time projects during the last legislative session. Current savings sit at $3.7 billion.

The second component of the reform plan ties future tax cuts to revenue triggers beginning next fiscal year. A preliminary run-through at the Board of Equalization meeting attempted to determine whether a trigger would be met. The baseline year from which revenue must grow is FY 2023, with total tax collections at $14.2 billion. An additional $340 million in growth is needed to trigger a tax cut. Oklahoma Tax Commission (OTC) numbers show FY 2025 tax collections were $13.6 billion, meaning no tax cut would have gone into effect. (The OTC’s revenue figure differs from the Treasurer’s report because the Treasurer’s number includes funds that are ultimately remitted back to cities and counties, whereas the OTC’s figure does not.)