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Oklahoma Governor Mary Fallin and legislative leaders recently announced their intention to repeal the state’s top personal income tax bracket, bringing the top rate down from 5.25 to 5.0 percent in 2015. The rate could be dropped even more by 2016 if a revenue growth target is hit. The Institute on Taxation and Economic Policy (ITEP), analyzed the initial cut down to 5.0 percent when it was proposed earlier this year, and found that its benefits would be heavily tilted in favor of the state’s wealthiest taxpayers. This is despite the fact that Oklahoma’s high-income taxpayers already pay far less (PDF) of their income in state and local taxes than any other group.
ITEP found that almost two-thirds of the tax cuts distributed under this plan would flow to the wealthiest 20 percent of Oklahomans, while the vast majority of the state’s poorest residents would receive no tax cut at all. Moreover, while a family in the middle of the income distribution could expect about $39 in tax cuts per year, Oklahoma’s most affluent taxpayers would receive tax cuts averaging $1,870 every year.
A new statement from the Oklahoma Policy Institute provides some important context for understanding the budgetary impact of this proposal (excerpt below).
Since 2008, Oklahoma public schools have endured the third largest budget cuts in the nation. Out of control tax breaks contributed to a collapse in revenue from oil and gas drilling. We still don’t know what will be the full cost of State Question 766 or what impact federal budget cuts will have on Oklahoma’s core services.
In this situation, it’s not the time for more tax cuts that would do little to help average Oklahomans, take $237 million from schools and other core services, and make Oklahoma more vulnerable to an energy bust or economic downturn. … Yet the proposal announced today would commit us to tax cuts two years from now, when we have no way of knowing what Oklahoma’s needs or economic situation will look like.