Oklahoma’s personal income tax rate would be immediately reduced and then gradually eliminated under legislation filed by state Sen. Micheal Bergstrom.

Senate Bill 1, by Bergstrom, would cut the state personal income tax from its current rate of 4.75 percent to 4.5 percent in the 2025 tax year.

The bill provides for additional, automatic income-tax reductions of another quarter-point every year the Oklahoma Legislature has at least $400 million in growth revenue available.

Cutting Oklahoma’s top income-tax rate from 4.75 percent to 4.5 percent would reduce tax collections by around $250 million annually once fully implemented, at least on paper, although that does not account for revenue increases typically generated by greater economic growth when income-tax cuts are provided.

SB 1 would not cut the tax rate during state revenue failures or shortfalls.

“I’m proud to champion a policy that supports hardworking Oklahomans and promotes economic growth,” said Bergstrom, R-Adair. “This measured, step-by-step approach ensures that our state remains on a sound financial footing while giving families and businesses more of their hard-earned money back.”

Members of the Oklahoma House of Representatives passed a similar measure in the 2024 legislative session, but that bill was never granted a hearing in the Senate. Lawmakers ultimately adjourned the 2024 legislative session without passing any income-tax cuts.

However, Bergstrom was among the Senate members who openly called for his chamber to embrace the tax-cut cause in 2024.

Oklahoma’s current top income-tax rate of 4.75 percent is higher than several neighboring states, including Texas (which has no personal income tax), Arkansas (where the rate is 3.9 percent) and Colorado (4.4 percent). Missouri’s top rate of 4.8 percent is almost the same as Oklahoma’s rate. Among bordering states, only Kansas and New Mexico have significantly higher personal income-tax rates than Oklahoma.

While Oklahoma has experienced positive net migration since 2019 as more people move into the state than leave it, Internal Revenue Service data show that states with no personal income tax are still outpacing Oklahoma, particularly when it comes to attracting higher-income individuals.

The Business Leaders Poll, a collaborative project of The State Chamber, the Oklahoma Business Roundtable, and The State Chamber Research Foundation, surveyed 325 business owners and executives in Oklahoma in early summer 2024.

The poll found that 78 percent of business leaders favored reducing or eliminating the state income tax, with half saying the state should use growth revenue to reduce the tax over time and 28 percent supporting “outright elimination of the income tax so Oklahoma can compete with other high-growth states.”

SB 1 can be considered when the 2025 legislative session begins on Feb. 3, 2025.