Budget & Tax

Budget, tax cuts gain approval

May 21, 2021

Ray Carter

Members of the Oklahoma Senate have provided final passage to the $8.8 billion state government budget, along with tax cuts.

“I strongly encourage you to vote for this budget and to put a bow on a session that has probably been the most special that I’ve been involved in as far as actually achieving results,” Senate President Pro Tempore Greg Treat, R-Oklahoma City, declared during floor debate. “It’s not always pretty, but we have achieved things that no one thought possible when we went into this session. We left last session $1.3 billion down, cutting things, and we are (now) making record investments in common education. We’re making investments in families and parents to be able to make choices.”

In a lengthy day of floor activity, members of the Senate gave final approval to several key measures of the state budget that had previously passed the Oklahoma House of Representatives.

House Bill 2900 is the “general appropriations” bill that gives the broad outlines of how lawmakers plan to spend $8.8 billion in the coming fiscal year.

House Bill 2962 cuts the state personal income-tax rate by a quarter-point, lowering the top rate from 5 percent to 4.75 percent. Oklahoma’s top income tax rate kicks in at $8,700 of taxable income for single filers and $15,000 for couples.

The bill also provides for the state’s “earned income tax credit” to be “refundable,” meaning individuals who qualify for the credit who do not earn enough money to owe tax liability are nonetheless provided state payments tied to the credit.

HB 2962 is expected to reduce the tax burden on Oklahomans by a combined $170 million annually.

House Bill 2960 cuts the state’s corporate income tax from 6 percent to 4 percent.

Opponents criticized several elements of the budget agreement, including tax cuts and the roughly $800 million put into state savings to build up state reserves above $1 billion.

“It’s a hasty and premature decision after a pandemic to cut $110 million out of our budget on an ongoing basis,” said Sen. Julia Kirt, D-Oklahoma City, referencing the income-tax cut.

“In my district, we don’t mind paying a little bit more,” said Sen. Mary Boren, D-Norman. “We don’t really want more to be stashed away of taxpayer funds in a savings account or more money returned back to corporations that pay their shareholders out of Oklahoma, possibly out of the United States of America.”

Those criticisms echoed arguments put forth by House Democrats when budget bills were heard in that chamber.

During debate earlier this week, House Minority Leader Emily Virgin, D-Norman, said the state should put some money into savings, noting her caucus called for about $300 million in savings, although that plan achieved that goal in part by raising other taxes by more than $200 million. But she said the $800 million put aside in the plan endorsed by Gov. Kevin Stitt and legislative leaders was too much.

“When folks are paying their taxes to the state of Oklahoma, I don’t think that they are asking us to stow it away in a savings account,” Virgin said. “They want us to take care of the needs of Oklahoma.”

But Republicans have hailed the increase in state savings, saying it is a fiscally prudent way to protect against future budget disruptions.

“We’re sitting here with a budget that has over $1.25 billion in reserves,” House Appropriations and Budget Vice Chair Kyle Hilbert, R-Depew, told his colleagues this week. “If you had told me a year ago when we were passing the general-appropriations budget for the FY21 budget that we would be coming into FY22 with the largest savings in state history, I wouldn’t have believed you.”

“While this is an $8.8 billion budget, we actually operate on about $30 billion a year,” said Senate Appropriations Chairman Roger Thompson, R-Okemah, referencing the figure for all sources of state government spending, not just legislative appropriations.

While it is significant to have more than $1 billion in savings, Thompson noted that is still a relatively small cushion for state government.

“You really have just about a month, maybe six weeks’ worth of spending in that dollar amount,” he said.

He also defended tax cuts, saying they can help fuel economic growth.

“Study after study has proven that whenever people have more income within their pockets, they’re better to make decisions for their family than the government is to make decisions for their family,” Thompson said. “Tax cuts increase that activity within our community. It increases the peoples’ ability to spend.”

HB 2900 passed the Oklahoma Senate on a 38-9 vote. HB 2962 passed the Senate on a 37-9 vote. HB 2060 passed the Senate on a 34-12 vote.

All three measures now go to Gov. Kevin Stitt to be signed into law.