Budget & Tax

Stitt calls for income-tax elimination

Ray Carter | September 1, 2023

In recent weeks, in interviews with both local media and national outlets, Gov. Kevin Stitt has called for Oklahoma to gradually eliminate the personal income tax to turbocharge the state economy.

“I’ve already cut taxes once and I’m trying to get another, deeper tax cut and really put us on a pathway to zero income tax,” Stitt said in a radio interview with KKAJ in Texoma. “We’re at 4.75 percent right now. Texas is at zero. And I want to lower our taxes, because when is the better time to do it?”

Stitt has noted the state has record savings and a growing economy, making it much easier to reduce the tax burden now. He stressed those points in a separate interview with Stuart Varney on the FOX Business Network.

“We have built the largest savings account in our state’s history in Oklahoma since I’ve been governor,” Stitt said. “We have a budget surplus, so now is the time to give that back to the people.”

Earlier this summer, Stitt’s office announced that state government is poised to have $4.82 billion in combined savings in the state’s Constitutional Reserve Fund, Revenue Stabilization Fund, Federal Medical Assistance Percentage (FMAP) Rate Preservation Fund, unspent reserves from prior years, and projected additional deposits to two of those funds.

Stitt noted state spending could be strategically increased in key areas while also lowering the income-tax rate by using growth revenue for both, and he suggested the income-tax rate could be cut “a quarter of a point at a time.”

“Over the next decade, you could put your state on the path to zero,” Stitt said. “That’s what I’m trying to get done through the Legislature.”

Domestic migration has benefited Oklahoma’s population growth during Stitt’s tenure as people have moved to Oklahoma from other states. Much of that migration has come from states that impose higher taxes.

However, the “How Money Walks” website, which uses IRS data to determine how much income people bring with them when they move to a state, or take with them when they depart, shows that Oklahoma continues to lose wealth primarily to Texas and Florida, two states that do not levy a personal income tax.

The loss of those typically higher-income individuals remains an economic headwind for Oklahoma.

The ability to offset income-tax reductions with growth revenue has long been noted as a viable strategy for gradual elimination of Oklahoma’s personal income tax.

In July 2004, economist Stephen Moore noted that from 1993 to 2003 the state of Oklahoma had collected more than $3.8 billion combined over that decade in excess of the amount required to maintain 1993 levels of spending even after adjusting spending for population growth and inflation.

The strategy used to build up state savings shows how spending restraint can also be used to reduce taxes. The nearly $5 billion in state savings was produced, primarily, by keeping spending lower than what policymakers were legally authorized to spend.

That practice has not resulted in cuts to other areas. In fact, state spending on K-12 education has boomed even as overall spending has been kept in check as state savings were increased and the personal income-tax rate lowered from 5 percent to 4.75 percent.

From 2019 to the current 2024 state budget year, an additional $1.37 billion has been devoted to K-12 education. That’s a greater increase than what occurred in the prior 25 years. From 1993 to 2018, state spending on education increased $1.35 billion.

Now that state savings have been built to sufficient levels to handle even a major economic recession without cuts to key areas of government, Stitt said policymakers can shift focus and use the same strategy to lower the personal income tax until it has been fully eliminated.

“We want to get rid of income tax, get that to zero,” Stitt said. “We want to be the most business-friendly state in the country.”

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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