Oklahoma Senate approves bill that includes a trigger for an income tax cut

Yahoo

11-04-2025

After more than an hour of discussion, the Oklahoma Senate voted mostly along party lines Thursday to approve a bill that would trigger an income tax cut if the state met certain revenue collection thresholds in the future.
House Bill 1539, authored by Rep. Mark Lepak, R-Claremore, and sponsored in the Senate by Sen. Micheal Bergstrom, R-Adair, passed by a 36-9 vote and will move back to the House for final consideration. Should the House approve the Senate's version of the bill without changes, it would go to Gov. Kevin Stitt's desk.
All seven Democrats in attendance in the Senate chamber opposed the bill, along with two Republicans, Sen. Brent Howard, of Altus, and Sen. Darcy Jech, of Kingfisher. Howard said during debate he didn't think the bill 'went through the process it should have' and said the Senate committee that considered the bill noted the legislation 'has problems.' Howard did not say what those problems were.
Senate President Pro Tempore Lonnie Paxton, R-Tuttle, supported the bill. He said there's always discussion about when is a good time to cut income taxes.
'When it comes to cutting taxes, I've found that we always find reasons not to do that,' Paxton said. 'It's a worthy discussion. … The caucus decided that we were ready to move forward with this.'
For years, Stitt has pushed for an income tax cut without success. Last year, the Senate, under then-President Pro Tem Greg Treat — stopped any such cut in its tracks. This year, Stitt has requested what he calls 'a half and a path' plan — a 0.5% cut from the state's current 4.75% income tax and a path toward having no income tax.
"I couldn't be more excited that a path to zero income tax is becoming a reality for our state," Stitt said. "We are headed in the right direction. Now, let's deliver an immediate income tax cut for the people of Oklahoma."
Paxton said Thursday a potential income tax bill this year is 'not off the table' despite the Legislature having slightly less funds to appropriate this year, compared to last year. Behind the scenes, though, legislative leaders have said such a cut is unlikely, given the revenue situation.
If it becomes law, the bill by Lepak and Bergstrom wouldn't result in an immediate income tax cut. But a tax cut would occur if state revenues — as estimated by the state Board of Equalization each December — rise by $300 million or more when compared against revenues collected during the just-completed fiscal year. The bill said any cut would be 'twenty-five hundredths of one percent (0.0025).'
More: Stitt renews call for tax cut, wants investigation of wildfire response
Multiple Republican senators used negative language when referring to the income tax. Bergstrom said Oklahoma should join nine other states with 'no state penalty on work.' Sen. Dusty Deevers, R-Elgin, called income tax 'legal plunder' by the government.
During debate, the Senate's two top Republicans, Paxton and Sen. Julie Daniels, R-Bartlesville, both expressed strong support for the bill. Daniels called it a 'fiscally conservative sound measure' and a 'sound way to slowly reduce the income tax.'
Democrats disagreed, with four of the seven present on Thursday arguing against it.
Senate Minority Leader Julia Kirt, of Oklahoma City, said the Senate should be prioritizing tax cuts targeted toward lower-income Oklahomans, noting the percentage cut included in the bill would, per capita, provide greater financial benefit to wealthier taxpayers.
Kirt also said any such cut would 'put at risk critical state services' in a time of financial uncertainty for states, particularly when it comes to federal revenues, given the cost-cutting by President Donald Trump.
Sen. Mary Boren, D-Norman, said cutting taxes would mean not having enough money to provide core services, such as law enforcement and education, should the state's population grow. She called the bill 'a four-day school week … waiting to happen.' Four-day school weeks are a measure used in recent years by some Oklahoma school districts to try and stretch financial resources.
'It was presented as if it was a conservative plan, but it actually did not have any measures or ways to determine what's going to happen with revenue in the future,' Kirt said. 'It's a trigger, which we've had problems with before. Other states have had problems with triggers.'
She said it was concerning that any such trigger would occur in December, well ahead of the legislative session that starts in February. That wouldn't provide the Legislature with an opportunity to 'course correct in real time' if necessary, she said.
According to an Oklahoma Tax Commission document attached to the bill's summary page, the agency noted it annually publishes income tax withholding tables in early December to ensure employers can withhold the appropriate amount of Oklahoma income tax for the upcoming tax year. The agency noted the two most recent December Board of Equalization meetings occurred on Dec. 22, 2023, and Dec. 20, 2024. That might cause logistical issues should the bill pass, the agency noted.
'This is a short time frame for employers to update income tax withholding for the potential new rate structure,' according to the document.
This article originally appeared on Oklahoman: Oklahoma Senate approves bill with trigger for income tax cut