Budget & Tax

Lawmakers start tax-cut session, but action appears unlikely

June 13, 2022

Ray Carter

Conceding to Gov. Kevin Stitt’s wishes, members of the Oklahoma Legislature met briefly on June 13 in a special legislative session that will focus on tax cuts.

But House lawmakers, who previously bemoaned Stitt’s call for broad-based tax relief, showed signs of continued dismay with the governor’s tax-cutting effort, filing legislation to instead slash the governor’s office budget—even as lawmakers’ own budgets have soared by double-digit percentages.

And Senate leadership announced the creation of a task force to study taxes, indicating that little will be done to address tax-relief issues in that chamber in the days ahead.

Stitt called the special session after the regular 2022 session ended in May with no significant pro-growth tax cuts enacted, despite a historic surplus.

During the regular session, lawmakers approved House Bill 4473 and House Bill 4474, which provided for Oklahomans to receive one-time $75 checks, as well as Senate Bill 1075, which repealed a 1.25-percent sales tax on automobile purchases.

Stitt vetoed the three measures, saying they did not provide broad-based tax relief or encourage new investment, and he noted the tax rebates would have been subject to federal taxes, meaning Oklahomans would have received only $56 in take-home pay.

Stitt instead called for cutting the state income tax by another quarter point, which would lower the rate to 4.5 percent, and exempting grocery purchases from Oklahoma’s 4.5 percent sales tax. He said those changes would save the average family $453 per year.

In recent days, Stitt’s office has stressed the need to change Oklahoma’s tax system in ways that provide families with financial relief and encourage economic growth, noting the increasingly troubled economic climate.

The day prior to the start of the tax-cut session, Carly Atchison, communications director for Stitt, tweeted, “Friday’s inflation report was devastating. +8.6% overall and no signs of slowing down. That’s why @GovStitt called for a special session to pass inflation relief tax reform.”

The special session on tax cuts—the third special session convened since 2021—began with House leadership announcing that at least 15 measures have been filed for the session, including two that would accomplish Stitt’s goal of cutting the income tax by a quarter-point and repealing the state sales tax on groceries.

Two bills would provide long-term income-tax cuts.

HB 1009XXX would cut the state personal income-tax rate from 4.75 percent to 4.5 percent.

HB 1010XXX would cut the state personal income tax by a half-point, reducing it to 4.25 percent.

Four bills would provide long-term reductions on grocery taxes. Those proposals—contained in HB 1014XXX, HB 1015XXX, HB 1016XXX, and HB 1017XXX–would repeal the state sales tax on groceries or both the state-and-local sales tax on groceries.

However, other House measures would provide only temporary tax relief, calling for taxes to be cut for two years and then increased again in subsequent years.

HB 1008XXX would temporarily reduce the personal income tax while HB 1012XXX and HB 1013XXX would temporarily reduce the grocery tax.

HB 1011XXX provides for a temporary, two-year increase in a sales-tax relief credit from $40 to $200.

House leadership also filed several other tax bills that were not part of Stitt’s special-session call.

HB 1021XXX would phase out the state’s corporate income tax over eight years. HB 1022XXX would suspend the state’s franchise tax.

In a release, House Speaker Charles McCall, R-Atoka, described the bills as “options the governor and Senate can choose from.”

Senate President Pro Tempore Greg Treat, R-Oklahoma City, suggested the House proposals were more public-relations effort than serious tax-cutting proposals.

“We remain committed to working on tax reform, but we’re not just going to throw every idea against the wall and hope something sticks,” Treat said.

He announced that state Sen. Julie Daniels will lead a newly formed task force that will review Oklahoma tax laws with the goal of developing a broader tax-reform package. Treat set no date for the completion of the task force’s work or timetable for action on any resulting proposals.

Daniels, R-Bartlesville, said lawmakers need to be thorough in developing tax-reform measures.

“Piecemealing it, if we truly want to look at a revolutionary way of redoing our tax policy in Oklahoma, we need to take some time with that,” Daniels said.

While House leaders did say they will vote on tax cuts, that rhetoric was partly undermined by several other House measures filed that appear designed to antagonize Stitt.

House lawmakers filed bills to reduce state appropriations to three government entities—including Stitt’s office. The proposed cut to the governor’s budget comes after House lawmakers loudly denounced Stitt on the last day of the regular session after the governor issued his vetoes and called for broader-based, permanent tax reductions.

On the last day of the regular legislative session, McCall accused Stitt of having a “glory-mongering tantrum” by vetoing the three bills and calling for the special session on tax issues, declaring those efforts to be “disrespectful demands.”

State Rep. Josh West, R-Grove, declared that Stitt was “a true narcissist.”

HB 1018XXX would cut the budget for the governor’s office by more than half, slashing the governor’s office budget from $3.5 million to $1.6 million.

The $3.5 million budget provided for the governor’s office was unchanged from the current budget, in sharp contrast to lawmakers’ spending on themselves. The budget plan unveiled by legislative leaders in mid-May showed that appropriations to the Oklahoma House of Representatives were increased by 18 percent this year while appropriations to the Senate were increased 15 percent.

Since the 2018 state budget year, lawmakers have increased the Oklahoma House of Representatives’ budget by 92 percent while the budget for the Oklahoma Senate has increased 45 percent.

HB 1019XXX cuts the budget for the Office of Management and Enterprise Services from $115.5 million to $70.5 million, and HB 1020XXX cuts the budget for the Oklahoma Health Care Authority from $859.8 million to $666.7 million. House lawmakers said the cut to the Oklahoma Health Care Authority was proposed because that agency received more matching funds from the federal government than anticipated.

The legislation seeking to cut the governor’s budget appears to violate constitutional restrictions on special-session legislation, which must be confined to the special-session call issued by the governor, a fact Treat noted during his comments.

“I’ll let the House speak for why they did that, but it’s definitely outside the scope of the (special session) call,” Treat said. “There’s a lot of shenanigans going on back and forth between the House and the governor.”

He said it is “obvious” that “the relationship between the governor and the House of Representatives is not at its highest point.”

House lawmakers are expected to reconvene briefly for procedural reasons on June 14, and then reconvene on June 15 when some or all the tax bills could receive a vote in that chamber. But Treat indicated the Senate is unlikely to consider any of those bills prior to the completion of the Senate task force’s work, which will conclude at an undetermined future date.