Budget & Tax

Ray Carter | October 3, 2023

Special session begins with calls for tax cuts, some opposition

Ray Carter

Saying tax cuts will spur economic growth and restrain government overspending, state leaders endorsed a reduction in Oklahoma’s personal income tax on Oct. 3, the first day of a special legislative session focused on tax policy.

At a press conference, Gov. Kevin Stitt, House Speaker Charles McCall, and State Treasurer Todd Russ all endorsed income-tax cuts, saying the time is right given that state savings are at historic highs and the state economy is strong.

But some Senate leaders suggested Oklahoma’s recent economic growth is in part the result of tax increases approved in 2018 and the free-spending economic policies of the Biden administration.

At his press conference, Stitt called for lawmakers to cut the state income-tax rate by a quarter-point, which would lower it to 4.5%. That would save Oklahomans $240 million per year.

“When you lower taxes you are expanding the tax base, the economy is being fueled, more businesses move, more people hire, more jobs are here, we’re not losing people to lower-tax states,” Stitt said. “It is great for everyone.”

House Speaker Charles McCall, R-Atoka, said House Republicans would pass the proposed quarter-point cut this week and approve a plan to gradually phase out the personal income tax. Typically, those plans use growth revenue to offset tax cuts over a period of several years.

“When you have surpluses and a strong-performing economy, that is the perfect time to lower taxes on the people of the state of Oklahoma,” McCall said.

Stitt said the Oklahoma government now has more than $5 billion in savings, meaning the state can withstand even a significant economic downturn in the future.

The governor stressed that a tax cut will not only benefit families and boost state economic growth, but also restrain the growth of government spending, which has skyrocketed since 2010.

From 2010 to 2023, the population of Oklahoma increased by 8%, he noted.

“At the same time, our appropriation budget has gone from $6.6 billion to last year it was almost $13 billion,” Stitt said. “So population, we’re serving 8-percent more people in the state of Oklahoma, and yet our budget has gone up right at 100 percent. This is unsustainable.”

Stitt noted Oklahoma state government revenue has steadily increased as policymakers have reduced the top rate from 7% in the 1990s to 4.75% today.

In contrast, when lawmakers temporarily bumped the rate back to 7% on one occasion, the opposite happened.

“If you look back at 2001, taxes went up a quarter of a point and they peaked out at 7 percent,” Stitt said. “If you notice, revenue actually went down.”

Grover Norquist, president of Americans for Tax Reform, said Oklahoma must compete with other states that are lowering their tax burdens.

“Oklahoma is surrounded by states moving their taxes down,” Norquist said. “Businesses hoping to invest don’t just ask, ‘What are your taxes now?’ They ask where your tax is going to be in five years, 10 years, 20 years. Getting to a single-rate tax assures people it won’t be going up. Getting it to zero assures them it won’t come back.”

McCall also noted that state revenues increased after the most recent quarter-point cut in the personal income tax. Today, state road funding is at a historic level, as is education funding.

“Ultimately, taxing the production and people’s labor discourages output and discourages achieving a higher level of output because it limits the amount of wealth and opportunity that the people of our state can achieve,” McCall said. “When we look across the country, the states that are performing the best have lower rates of taxation and those that are really performing well have zero percent taxation on personal income.”

But Senate leaders appeared to dismiss those figures during a subsequent meeting of the Senate Appropriations Committee, instead suggesting the revenue growth noted by Stitt and McCall are the product of tax increases enacted from 2016 to 2018 and/or federal spending by the Biden administration.

“I was listening to others this morning on a press conference. They attributed increases in our revenue to, I believe, the quarter-point decrease that we did two years ago,” said Senate President Pro Tempore Greg Treat, R-Oklahoma City. “I would love to see an analysis and have your thoughts on how much is attributed to that quarter-point income-tax cut versus the increases we did in 2017.”

Russ, who appeared before the committee, responded that in every economic cycle following every tax cut approved for many years “the revenues actually increased.”

Treat’s tune appeared to alter slightly when he later tweeted, “I want to get to 0 income tax,” but called for more details.

During the committee hearing, Russ also said Oklahoma state government spending is out of line with regional counterparts, saying per-capita state-budget spending in Oklahoma is higher than in four of the six surrounding states.

State Sen. Greg McCortney, R-Ada, asked if “some of this increase is not related at all to the economy of the state of Oklahoma and the long-term strength of our economy,” but instead if “some of this drastic increase is because of the federal spending?”

“Do you have any way to quantify how much of this increase is due to all of that funny money from the feds cycling through and through our state?” McCortney said.

Russ said that analysis could be done, but also noted state growth has been generated by true growth. In particular, he noted that Oklahoma’s response to COVID, which involved far less restraint on personal and economic activity than what occurred in other states, caused many people to move to Oklahoma, benefiting the state economy.

“We’re seeing incredible growth from people moving into the state of Oklahoma because we didn’t shut down hard,” Russ said.

McCortney noted that Russ was among those who voted to increase taxes in 2018 as a member of the Oklahoma House of Representatives, but that Russ had also voted for tax cuts in prior years.

“Did you regret the tax-decrease votes when we were trying so hard to do the tax increases?” McCortney asked.

Russ responded: “I never regretted any tax cut that I voted for.”

Ray Carter Director, Center for Independent Journalism

Ray Carter

Director, Center for Independent Journalism

Ray Carter is the director of OCPA’s Center for Independent Journalism. He has two decades of experience in journalism and communications. He previously served as senior Capitol reporter for The Journal Record, media director for the Oklahoma House of Representatives, and chief editorial writer at The Oklahoman. As a reporter for The Journal Record, Carter received 12 Carl Rogan Awards in four years—including awards for investigative reporting, general news reporting, feature writing, spot news reporting, business reporting, and sports reporting. While at The Oklahoman, he was the recipient of several awards, including first place in the editorial writing category of the Associated Press/Oklahoma News Executives Carl Rogan Memorial News Excellence Competition for an editorial on the history of racism in the Oklahoma legislature.

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