Oklahoma's tax rate has gone down

OKLAHOMA CITY (AP) _ Legislation containing significant state tax changes took effect Sunday, the first day of 2006. <br/><br/>A package of bills containing $150 million in tax cuts and $92 million in

Saturday, December 31st 2005, 3:08 pm

By: News On 6

OKLAHOMA CITY (AP) _ Legislation containing significant state tax changes took effect Sunday, the first day of 2006.

A package of bills containing $150 million in tax cuts and $92 million in rebates was passed by the 2005 Legislature. In December, married Oklahomans got income tax rebate checks of $90 and individuals got rebates of $45.

Some of the biggest changes this year and next are in the income tax area. The top tax rate is dropping from 6.65 percent to 6.25 percent, effective for income tax forms that will be filled out in 2007 for the 2006 tax year.

The state's standard deduction also is going up, increasing from $2,000 to $3,000 for most taxpayers for the 2006 tax year and to $4,000 after that.

The result of the tax rate reduction and the increase in the standard deduction will be a $225 income tax savings for a family of four with an income of $50,000, according to Sen. Jay Paul Gumm, D-Durant.

Tax computation also is being simplified through the elimination of a second method of computing taxes known as Method II, and tax brackets are being adjusted to make sure lower income taxpayers are not penalized by that change.

This year and next will be good ones for all retirees, and Gov. Brad Henry says he wants to further reduce retiree taxes when he puts together his executive budget for presentation to the newly convened Legislature on Feb. 6.

Under a bill enacted in 2005 and effective for the 2006 tax year, half of a retiree's military income is exempt from income taxes, or $10,000, whichever is greater. The current limit is $7,500.

All retirees will see their income exemption increase from $5,500 to $7,500 under legislation enacted in 2004 and effective for tax forms that will be filled out this year.

The legislation also drops the requirement that a retiree reach age 65 before the exemption is in effect and increases the adjusted gross income limit to qualify for the exemption from $25,000 to $37,500 for an individual and from $50,000 to $75,000 for a couple.

Under the 2005 legislation, all retirees will get a $10,000 income tax exemption effective for taxes computed in 2007.

``People are a little confused'' by all the tax changes, said Michelle Thompson, spokeswoman for the Oklahoma Tax Commission.

Legislation effective this year allows individuals a capital gains deduction on Oklahoma-based property. That deduction was extended to corporations by the 2005 Legislature under certain circumstances.

Tax bills passed the last two years also include a number of targeted tax credits. Included in the tax breaks are agriculture, the oil and gas industry, film and music production projects, the coal industry, housing contractors, railroads, ethanol facilities, biodiesel facilities, wind turbine manufacturers and computer-related facilities.

A number of sales tax exemptions were approved, including exempting purchases by organizations that help the mentally ill and handicapped and purchases by nonprofit groups that build hospitals and organizations that help distribute products to the needy.

A non-tax measure taking effect Sunday expands the state's DNA database system. The bill requires anyone convicted of a felony to provide a DNA sample to the Oklahoma State Bureau of Investigation. Previously, only those convicted of violent crimes or sex offenses had to provide the samples.

The measure received broad support and sponsors hope it will help solve many cold case crimes.