February 12, 2012
Governor Mary Fallin
Last week, I asked legislators to support me in implementing the most significant income tax reduction plan in state history: the Oklahoma Tax Reduction and Simplification Act.
Our plan is bold. It cuts income taxes by a significant amount for a majority of Oklahomans in every tax bracket and of every income level.
It is fast-acting. Our initial tax cuts would take place on Jan. 1, 2013.
It makes sense. Our plan takes Oklahoma's outdated, seven-tiered system — which taxes the first dollar that every Oklahoman makes — and replaces it with three common-sense brackets. Married couples filing jointly making less than $30,000 would pay no income taxes, or zero percent. A couple making between $30,000 and $70,000 would pay a 2.25 percent tax rate, a significant reduction. Finally, those making more than $70,000 would be taxed at a rate of 3.5 percent, down from 5.25 percent.
Our tax proposal is also responsible. The plan sets the stage for the complete elimination of the income tax by proposing a quarter-point reduction in taxes each year after the initial cuts. However, those cuts are tied to a revenue growth trigger of 5 percent, meaning that if the state experiences a shortfall or another recession, it won't be stripped of the revenue it needs to fund core services. Furthermore, our proposal is largely paid for by eliminating government waste as well as dozens of tax loopholes and tax credits, creating a system that benefits everyone as opposed to narrow special interests. Future economic growth — spurred by lower tax rates — will also help offset costs.
Finally, the Oklahoma Tax Reduction and Simplification Act is what I like to call a “game-changer.” By implementing our tax plan, we would immediately become a more attractive state to do business in. Oklahoma would have one of the lowest income tax rates in the country and the lowest in our region, second only to Texas.
Studies show that income tax levels can be an accurate predictor of job growth. As Americans for Prosperity reports, states with no income taxes have seen job growth of 4.7 percent over the last 10 years, while high-tax states have lost jobs at a rate of 2.9 percent.
Those statistics quantify what any small business owner knows in his gut: Higher taxes create an unfriendly climate for business, stifle expansion and job growth and can even force relocation. Lower taxes do just the opposite.
Despite the fact Oklahoma is experiencing a strong recovery and healthy economic growth, we cannot afford to be complacent. To our north, Kansas and Missouri are acting to reduce their income taxes. Texas already has none. Businesses will always have a choice.
We can make that choice an easy one. By embracing a simpler tax code that allows Oklahomans to keep more of their hard earned money, we can set our state and our citizens on a path toward greater prosperity and attract greater investment and job growth from across the country.