OKLAHOMA CITY — A major overhaul of Oklahoma’s workers’ compensation system and revisiting plans to reduce the state’s personal income tax are among the top priorities for legislative leaders when they return to the state Capitol for the 2013 legislative session.
But Gov. Mary Fallin and President Pro Tem Brian Bingman say the state budget and a possible tax cut hinge largely on whether Congress is able to avert the looming fiscal cliff and the resulting automatic, government-wide federal spending cuts that are scheduled to take place Jan. 1.
“There’s a lot of uncertainty in Washington right now, and that uncertainty can affect Oklahoma and our economy,” Fallin told The Associated Press on Friday. “In general, we do plan on making a proposal for lowering our income tax. We’re still debating what that proposal will be in light of the discussions going on in Washington.”
Fallin will lay out her priorities for the 2013 session in her State of the State address when the Legislature convenes during the first week of February. Although she declined to reveal specifics, Fallin said she will continue to push to create the “best business climate possible,” including changes to the workers’ compensation system, and more efficient state-government operations.
During her State of the State speech at the start of the 2012 session, Fallin laid out an ambitious proposal to slash the state income tax from 5.25 percent to 3.5 percent, beginning in 2013, and then continue to cut the rate by one-quarter of 1 percent each year that certain revenue growth triggers were met.
But that proposal began to get sidetracked when lobbyists fought to keep in place dozens of exemptions and deductions that would be used to make up for the lost revenue. At the end of the session, Fallin and legislative leaders reached a tentative agreement on a more modest reduction from 5.25 percent to 4.8 percent, but even that deal fell apart in the waning days of session, and Fallin ended up with nothing on the tax-cut front.
Bingman, who consistently advocated for a responsible tax cut last session, said Friday he will assume that same position on tax cuts next year, especially given the uncertainty over federal funding.
“That was my concern last year, was looking at the whole picture, and let’s not get too aggressive on reducing the income tax when in fact we’ve got a lot of challenges ahead of us, and the economy is not growing the way we want it to, so let’s be prepared for a tough economy out there,” said Bingman, R-Sapulpa. “Oklahoma is in much better shape than the rest of the states, but I think there are ways to look at being responsible when we look at cutting taxes.”
Bingman said another one of his priorities will be a major overhaul of the state’s workers’ compensation court system, including a transition to an administrative system.
“We’d like to see some dramatic changes that really are meaningful,” Bingman said. “The bottom line is: What does it take to get the premiums down in Oklahoma to make us competitive with neighboring states.”
Even Democrats in the Republican-controlled Legislature said they support reducing the workers’ compensation costs for Oklahoma businesses, but House Democratic Minority Leader Rep. Scott Inman stopped short of endorsing a plan to abolish the workers’ compensation court.
“We are one of the worst states in the country in terms of the costs of doing business as it pertains to workers’ comp, and we are committed to working with the Republican caucus to find ways to lower those costs,” said Inman, D-Del City. “But we’re not in a position to say we want to see an administrative system overhaul.”
Inman said GOP leaders also can’t count on members of his caucus to support any major cuts in the state’s income tax.
“We certainly hope that they’ve awakened to the idea that abolishing the state income tax would be devastating for infrastructure, education, health care, and public safety in the state of Oklahoma,” he said.
One of the most vocal supporters during the 2012 session of completely eliminating Oklahoma’s personal income tax — Rep. Leslie Osborn, R-Mustang — said Friday she plans to introduce a bill during the upcoming session for a much more modest proposal.
Her new plan, which she said was discussed at length during a recent GOP caucus retreat, would involve no changes to income tax brackets or deductions and exemptions, and that each one-quarter of 1 percent reduction in the top income tax rate would only occur if certain revenue-growth triggers were met.
“It’s going to be very modified,” Osborn said. “With that, I see it having a much better chance.”
Osborn said she also intends to push next year for a merit-based system of pay hikes for state employees, who haven’t seen a pay raise in six years.