Keating to push for most far-reaching income tax-cut plan yet

OKLAHOMA CITY (AP) -- Gov. Frank Keating is planning to call for his biggest income tax cut when the Oklahoma Legislature convenes Feb. 5.

Budget writers are putting the finishing touches on a tax-cut program that would slash the individual income tax rate to 3.75 percent over six years.

The first-year reduction would be .50 percent, costing approximately $50 million, and is expected to be rigorously opposed by some legislative leaders who think the state cannot afford a cut of that magnitude.

Keating, who leaves office in two years, had previously proposed reducing the income tax by .25 percent a year to 5.5 percent over several years.

Going to 3.75 percent would make Oklahoma the lowest income tax state in the region, except for Texas, which has no income tax.

The Oklahoma tax, under the most common method of computing it, is now 6.75 percent.

Keating has proposed income tax cuts annually since taking office, but succeeded in reducing the tax only once -- by a quarter percent in 1998.

The Republican governor has said that cutting individual income taxes is the best thing lawmakers can do to lure industry to the state.

Democrats have said such a reduction would devastate the state's tax base, undercut education and thus hurt the state's job-recruiting effort in the long run.

Keating is expected to call again for reducing estate taxes and is considering a sales tax holiday, an idea that is popular among Republicans and Democrats. He also is looking at a tax incentive package to help small business entrepreneurs.

"Rest assured, tax cuts will be a major part of the governor's program this year," said Dan Mahoney, Keating's communications director.

He said budget writers are in the last stages of formulating the governor's tax program, which he said will be "pretty aggressive, but doable."

Sen. Cal Hobson, D-Lexington, has said that commitments and critical needs all but rule out a major tax cut this session without hurting education and highways. Legislators will have almost $300 million in new revenue, but Hobson said most of that is already spent.

Keating's program, whatever it is, will be a drop in the bucket compared with cost of a raft of tax-cut bills filed by House and Senate members.

The House Republican caucus has endorsed a tax-cut program totaling more than $400 million a year, although Senate Minority Leader Fred Morgan, R-Oklahoma City, acknowledges it has no chance of passing intact.

The GOP House plan calls for only a .25 percent cut in income taxes, but proposes a grocery sales tax cut that would cost an estimated $190 million.

In all, more than 150 revenue-reducing bills have been filed in the House. Many were filed by members of the resurgent GOP minority.

Democrats lost eight seats in the 2000 general election and retains only a 53-48 edge over Republicans in the 101-member House, which will be led by a new speaker, Rep. Larry Adair, D-Stilwell.

"The cost of the House tax bills, if you laid every bill out on the table, would probably be a billion dollars or more," said one legislative staffer.

Rep. Clay Pope, D-Loyal, the new chairman of the House Revenue and Taxation Committee, won't guess about the possible size of a tax cut this year, "but I would be very surprised if there wasn't some tax reduction of some kind."

House Democrats have voted in caucus to support such things as a sales tax holiday and tuition and day care tax credits.

Ironclad spending commitments total about $190 million, not counting state employee and teacher pay issues, Pope said.

A shortage of prison guards, blamed on poor pay, is fueling a drive for a significant appropriation to the Department of Corrections. There also is a strong push to provide colleges with funding to match private money for endowed chairs.

As usual, the final tax-cut decision may not come until near the end of the session in late May.

In the meantime, Pope said, "We're going to try and keep as many tax ideas alive as we reasonably think we might reach some consensus on."