Committee Votes To Accelerate State Income Tax Cuts
Tuesday, February 27th 2007, 3:48 pm
By: News On 6
OKLAHOMA CITY (AP) Wary of lower-than-expected revenue estimates, a state House committee voted Tuesday to accelerate state income tax cuts but at a slower pace than originally planned.
The measure faces an uncertain future. Lawmakers are still assessing the impact of more than $600 million in tax cuts enacted last year -- including the largest income tax cut in state history. And they have urged budgetary caution since revenue estimates cut by more than half the amount of new revenue available to spend this year.
The bill, passed 7-2 by the House Appropriations and Budget Committee, would reduce the top income tax rate from 5.65 percent to 5.5 percent next year and 5.25 percent in 2009, if revenue growth is at least 4 percent plus the cost of the tax cut.
The bill accelerates the pace of the income tax cut approved last year. The top income tax rate is scheduled to decline to 5.55 percent next year, 5.5 percent in 2009 and 5.25 percent in 2010, subject to the revenue growth trigger.
Accelerating the cut would reduce revenue by $8.7 million next year and $58.6 million when fully implemented, said Terrill, R-Moore.
"It's reasonable in the framework of the growth revenue that we have," said Terrill, chairman of the Revenue and Taxation Subcommittee.
The measure represents a more modest cut than that approved by Terrill's subcommittee, which voted earlier this month to reduce Oklahoma's top income tax rate from 5.65 percent to 4.65 percent over two years.
Terrill said the tax cut plan was revised after the Board of Equalization reduced the amount of new revenue available to the state to $114 million -- less than half the $277 million that was estimated in December.
Officials said only about $235 million in total new revenue is available, combining growth funds and surplus cash.
Terrill said there is "substantial support" among the House's Republican majority for accelerating the pace of last year's tax cuts but that House Speaker Lance Cargill, R-Harrah, has not endorsed the plan.
"It has not been expressly signed off by the caucus," Terrill said.
Without opposition, the committee also passed Terrill's plan to reduce Oklahoma's corporate income tax. The proposal has been endorsed by The State Chamber, a business and industry group.
Currently, the state imposes a flat tax of 6 percent on all corporations. Terrill wants to implement a graduated scale that reduces the tax for most businesses, particularly small companies.
Under the bill, companies with less than $10,000 in taxable income would pay no corporate income tax. Those earning $10,000 to $50,000 would pay a 1 percent tax, while those earning $50,000 to $100,000 would pay 2.5 percent.
Those generating up to $200,000 in income would pay a tax rate of 4.5 percent, and only the largest companies -- those earning more than $200,000 per year -- would pay the 6-percent rate.
The tax measures, House bills 1388 and 1386 respectively, now go to the House floor for a vote.