Tax Cut Issue Looms Over New Legislative Session

Image of Oklahoma State Capitol

Right now, Republicans seem just as disorganized over cutting the state’s income tax rate as they did at the end of the last legislative session.

Last year, despite large majorities in the Oklahoma House and Senate, the GOP wasn’t able to pass a tax cut plan even though Republican Gov. Mary Fallin had made it a signature item in her state of the state speech at the session’s beginning.

I speculated about the reasons for the lack of a tax cut last year here. Those reasons included the state GOP’s inability to produce a sound tax policy, Republican in-fighting and maybe, just maybe, concern shared by many Democrats that it would lead to more state budget cuts.

Did some leading Republicans even want a tax cut in the first place last year?

Now, with the session scheduled to begin on Monday and with even larger majorities, Republicans have yet to offer a clear, unified plan about cutting the income tax. Looming over any tax cut proposal will be the case of neighboring Kansas, which recently cut taxes and ended up with drastic budget problems.

The lack of a real plan could change after Gov. Mary Fallin’s state of the state speech Monday, but so far the only real news has been the absence of anything specific and passable. Both Fallin and House Speaker T.W. Shannon, a Lawton Republican, have indicated they will push for a tax cut but have not been direct about it. Shannon has said he wants a “thoughtful” tax cut. Fallin has said she wants a cut without any offsets, but she has declined to reveal the size of her proposed cut before her speech. Both Shannon’s and Fallin’s reticence could indicate there’s no clear GOP consensus.

Meanwhile, state Sen. Patrick Anderson, an Enid Republican, has floated a proposal to lower the income tax to a flat rate of 2.95 percent from its current top rate of 5.25 percent and eliminate all deductions, but it’s unclear whether such a drastic plan has or could muster much support.

Fueling the tax cut mania is the public Republican fallacy that cutting taxes will lead to business growth in the state. This is not empirically proven nor is it likely to happen here in Oklahoma. Another idea behind the tax-cut craze is to reward what some in the GOP called the “makers” and punish what they call the “takers.” In other words, the GOP wants to create even more income disparity between the rich and everyone else.

Last year, I, along with many other political observers, predicted at the start of the session that a tax cut was basically a done deal, but it didn’t happen. This year, the silence is so deafening it’s difficult to predict. I do expect more intraparty squabbling among Republicans over a bevy of issues, including taxes.

The only clear assessment is this: Any tax cut that is not completely revenue neutral would be highly irresponsible and lead to more budget problems. The last thing this state needs is more cuts to state agencies and education.