States across the nation continue cutting income-tax rates with a new round of reductions taking effect this month. The trendline has Oklahoma falling behind in the race to attract investment and job creation.

In the 1990s, Oklahoma’s top income-tax rate was 7 percent. It has since been reduced to 4.75 percent. But even that 4.75 percent rate now significantly exceeds what entrepreneurs would face if they took their money elsewhere.

In 2024, the citizens of Iowa paid an income-tax rate of 4.4 percent to 5.7 percent, based on income. But starting in January, Iowa now imposes a flat tax rate of 3.8 percent, well below the top rate in Oklahoma. When Iowa Gov. Kim Reynolds was elected in 2018, Iowa’s top income tax rate was 8.98 percent—the sixth highest in the country.

Similarly, on Dec. 4, 2024, Louisiana Gov. Jeff Landry signed into law a bill that replaced that state’s three income-tax brackets, which ranged from 1.85 percent to 4.25 percent, with a flat tax rate of 3 percent starting on Jan. 1, 2025.

The Louisiana reform also increased the standard deduction from $4,500 to $12,500 for taxpayers who are single or married filing separately and from $9,000 to $25,000 for taxpayers who are married filing jointly, heads of household, or surviving spouse. And beginning Jan. 1, 2026, Louisiana’s standard deduction will be increased annually by the percentage increase in the Consumer Price Index.

In 2022, lawmakers in Mississippi voted to impose a flat tax rate on income and lower the rate over several years. That state’s income tax rate was cut from 5 percent to 4.7 percent for 2023, then to 4.4 percent for 2025, and is scheduled to decline to 4 percent in 2026.

Beginning in January, citizens in North Carolina saw their state’s income tax fall from 4.5 percent to the current rate of 4.25 percent. And the rate is scheduled to continue declining in future years until it hits 2.49 percent.

This month, citizens in Indiana saw their state’s flat-income tax rate shaved from 3.05 percent to 3 percent.

Currently, 14 states now have a flat tax, while nine states do not impose an income tax on wages (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming). And some states with a flat tax have rates well below Oklahoma’s top rate of 4.75 percent, such as Arizona, which has a flat rate of 2.5 percent.

Oklahoma’s current top rate of 4.75 percent is higher than the rates imposed in several neighboring states, including Texas (which has no personal income tax) and Colorado (4.4 percent). When Arkansas Gov. Sarah Huckabee Sanders took office in 2023, the top individual tax rate in Arkansas was 4.9 percent, which was higher than in Oklahoma. Now it has a top rate of 3.9 percent. Similarly, the top rate in Missouri fell to 4.7 percent starting this month, dipping below Oklahoma.

Among bordering states, only Kansas and New Mexico have higher personal income-tax rates than Oklahoma.

Some policymakers have sought to keep Oklahoma competitive in the income-tax race.

In 2023, Oklahoma Gov. Kevin Stitt called for cutting the state personal income-tax rate to 3.99 percent and released a budget plan that outlined how to achieve that goal. Oklahoma had a $1.2 billion surplus at that time. However, state lawmakers did not agree to that plan.

Similarly, in 2024, House lawmakers advanced House Bill 2950, by then-House Speaker Charles McCall, which would have given Oklahoma a flat-tax system and raised the threshold for imposition of the tax to income above $13,350 for single filers or $27,100 for joint filers, heads of households, and qualifying widowers.

Currently, 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.

Senate lawmakers declined to take up that bill as well as another proposal that would have put Oklahoma’s personal income tax on a path to gradual elimination.

However, lawmakers in both legislative chambers have filed legislation for the 2025 session that would cut Oklahoma’s personal income tax and put it on the path to elimination.