SEAN MURPHY Associated Press
January 23, 2014
OKLAHOMA CITY (AP) — Republican Gov. Mary Fallin said Wednesday she will outline plans for an income tax cut during next month’s State of the State speech, despite a projected $170 million revenue shortfall next fiscal year.
Fallin said the details of the tax cut still are being worked out but will be included in her executive budget presented to lawmakers on Feb. 3 at the start of the legislative session.
“You will see me propose a tax cut that we believe is affordable for our state,” Fallin said. “We’re still working on our budget, looking at the numbers, and setting our priorities for spending.”
As governor, Fallin must present a balanced budget to lawmakers based on about $6.96 billion in revenues the state is expected to collect next fiscal year. That’s about $170 million less than the Legislature appropriated to state programs in this year’s budget. A final certification of the projected available revenue will be made next month.
Fallin suggested at least some of the lost revenue will be offset in her proposed budget with targeted cuts to agency budgets or state programs.
“We will have some targeted cuts this year,” Fallin said.
A cut in the state’s income tax has been an elusive goal for Fallin. Her first proposal in 2012 to deeply cut the rate and offset the lost revenue with the elimination of dozens of tax credits and deductions fell apart amid resistance from lobbyists who fought to keep many of the tax exemptions in place. Then an agreement among GOP leaders last year to cut the rate from 5.25 percent to 5 percent, beginning in 2015, was thrown out by Oklahoma Supreme Court because it included more than one subject, violating a requirement of the state constitution.
It is estimated that a 0.25 percent cut in the state’s income tax rate would cost the state about $120 million annually.
David Blatt, the head of a Tulsa-based think-tank that advocates for increased funding for state services, said plans to push for a tax cut amid a projected $170 million hole in next year’s budget is fiscally irresponsible.
“It defies credibility to say we can afford cutting taxes even deeper when class sizes are rising, corrections officers are risking their lives in overcrowded prisons, and we still don’t have enough foster homes to protect our most vulnerable children,” Blatt said. “These are preventable tragedies, but only if we stop the march of unnecessary tax cuts, take sensible steps to curb unnecessary tax breaks, and invest in Oklahomans.”
Both House Speaker T.W. Shannon and Senate President Pro Tem Brian Bingman have signaled their willingness to support a tax cut this year.
“I think we have made a commitment and we need to honor that for the people of Oklahoma,” Bingman, R-Sapulpa, said in a statement. “But, at the same time, our budget outlook has shifted dramatically in the last year.”
Several GOP members in the House and Senate have proposed a plan to cut the income tax even deeper, with a series of cuts that would drop the rate from 5.25 percent to 4 percent by 2018.