Members of the Oklahoma Senate have voted to gradually eliminate Oklahoma’s tax on work and investment, the personal income tax.

The measure is now only one vote away from the governor’s desk. For procedural reasons, it must be approved a second time in the Oklahoma House of Representatives, which previously approved the same legislation.

“There are nine states with no state penalty on work,” said state Sen. Micheal Bergstrom, R-Adair. “Consistently, they’re experiencing better growth and opportunity, and this is not a surprise. When you don’t penalize work and job creation in the form of state income taxes, your citizens are better positioned to pursue opportunity for themselves and to expand opportunity for others.”

House Bill 1539, by state Rep. Mark Lepak and Bergstrom, would cut Oklahoma’s 4.75-percent personal income-tax rate by a quarter point each time that net state revenue increases by at least $300 million, continuing the process until the tax is completely repealed.

Bergstrom noted that another nine states are currently pursuing policies that will eventually repeal their states’ income taxes as well. That means as many as 18 states may have no personal income tax in the future, he noted.

Oklahoma’s current 4.75 percent personal income tax rate is among the highest in the region.

Texas has no personal income tax while Colorado imposes a 4.4 percent rate. Officials in Arkansas have cut their rate to 3.9 percent. The top rate in Missouri fell to 4.7 percent in January. Louisiana has cut its income-tax rate to 3 percent.

Among bordering states, only Kansas and New Mexico currently have higher personal income-tax rates than Oklahoma—and Kansas officials recently voted to gradually cut their tax to 4 percent.

Opponents dismissed the pro-growth arguments of those supporting HB 1539.

State Sen. Julia Kirt, D-Oklahoma City, argued that few Oklahomans would see real benefit from having their income-tax burden reduced.

“Income tax cuts benefit the wealthy,” Kirt said, saying those who benefit most from the legislation are from “our higher income-tax brackets.”

However, Oklahoma’s top personal income tax rate is imposed on those with incomes of $7,200 for single filers and $12,200 for joint filers and lower tax rates are imposed for those with incomes below those thresholds.

Kirt also argued that increased reliance on sales tax would be a problem for state government spending, saying that source of revenue is expected to decline. She indicated sales tax should be added to many currently untaxed services as well as currently taxed goods.

However, data in a recent report from the Tax Foundation indicate Oklahoma government will enjoy more budget stability if it relies more on existing sales tax collections. The report noted that sales taxes “offer greater stability than income taxes, as can be seen in aggregate state tax collections during and immediately after the Great Recession.”

“In Oklahoma in 2010, individual income tax collections were down 20 percent and corporate income tax receipts slipped 40 percent,” the Tax Foundation report noted, “while sales tax collections only declined 6 percent.”

State Sen. Mary Boren, D-Norman, said Oklahoma government will suffer if tax cuts attract more people to the state who work and boost state tax collections, because those new citizens will also increase government costs through things like rising school enrollment, for example.

“If this increase in revenue is coming from us successfully welcoming new Oklahomans into our state, and they start working here and they start generating revenue, and they start adding to our economic base, and they contribute to that increase of $300 million revenue, this bill doesn’t talk about the increase in costs to the school for all those kids coming into our school,” Boren said.

However, nine states have no personal income tax today, and all nine states have maintained their public schools, police and fire departments, hospitals, and road systems.

And, contrary to stereotype, five states with no personal income tax also have the same or lower effective property tax rates than Oklahoma.

Senate President Pro Tempore Lonnie Paxton, R-Tuttle, said that during his eight years in office the appropriated state budget has roughly doubled. He said that unsustainable trajectory of spending growth will not change unless lawmakers act.

“The insatiable appetite to consume more tax dollars will never cease,” Paxton said.

Other lawmakers said the class-warfare arguments put forward by opponents of income-tax repeal don’t hold up to scrutiny.

“Taxing income punishes productivity,” said state Sen. Dusty Deevers, R-Elgin. “One of the things that is most valuable for people and for a society is to see a productive people. And if you tax their labor, it doesn’t make them want to be more productive. It actually disincentivizes this productivity. And if you disincentivize even the people who are building businesses and who are paying the most taxes, well, they’re going to be disincentivized from building more businesses and providing more jobs that will in turn help everyone. We have seen a pinching off of the middle class, which was the backbone of our culture, of our society. When we pinch off the middle class, well, everybody starts to hurt. The middle class is what builds small towns, and we need a thriving middle class if we are going to support the most poor among us.”

State Sen. Shane Jett, R-Shawnee, made a similar argument.

“This is not pitting rich against poor in a class-warfare ideology,” Jett said. “This is simply saying if you are making or creating wealth in Oklahoma, we respect you and we want to put that money back in your pocket.”

State Sen. Julie Daniels, R-Bartlesville, said the scenarios touted by opponents are far-fetched given the actual provisions of HB 1539.

“This is a fiscally conservative, sound measure that gradually, over a long period of time, will slowly reduce our income-tax rate,” Daniels said.

Under the bill, tax cuts do not occur in a year when state revenue declines, meaning the bill will not mandate tax cuts that force spending cuts elsewhere.

Bergstrom said the message sent by approving the bill is simple.

“Here’s what, basically, we have here in this bill: We’re going to stop, to the best of our ability as quickly as we can, punishing people for work,” Bergstrom said.

HB 1539 passed the Oklahoma Senate on a 36-9 vote. It now returns to the Oklahoma House of Representatives, where the legislation previously passed on a 76-20 vote.