House Passes Bills To Reduce Personal, Corporate Income Taxes

Mar 11, 2021

Credit Oklahoma House of Representatives

The Oklahoma House passed bills on Thursday that would reduce what Oklahoma residents and corporations pay in income taxes starting in 2022.

House Bill 2041 uses a combination of credits to offer the equivalent of a 0.25% rate cut for all individuals. That would mean nearly $178 million going back to taxpayers, an amount House Appropriations Chair Kevin Wallace (R-Wellston) is banking on to give the state economy a boost through additional spending.

A sizeable chunk is going to the state’s highest earners. An analysis found households making $1 million or more would get $1,028 back, a larger amount of money than lower-earning households but a smaller percentage reduction of their tax burden than most. Those earning between $10,000 and $12,000 would get $45, a 389% reduction of their tax burden.

"We don’t want to give folks handouts for not working hard enough. Well, we are preparing to give a $200 million handout to people who do not need it. Those millionaires that are going to get $1,000 back, I bet that additional $1,000 isn’t going to come back into the economy," said Rep. Monroe Nichols (D-Tulsa).

There may be a wrinkle in the plan, though. Rep. Chad Caldwell (R-Enid), citing the Wall Street Journal, told Wallace he'd heard the COVID relief package President Joe Biden signed Thursday contains a provision saying funds can’t be used by states to cut taxes.

"Is it your understanding that even if that is accurate, that your plan will still work?" Caldwell said.

"We’ll wait to see, but I can tell you this bill is not a result of that $1.9 trillion being passed or coming. It’s the state of Oklahoma’s economy," Wallace said.

According to the Center on Budget and Policy Priorities, the American Rescue Plan Act does not stop states from cutting taxes. It does say they can’t use federal dollars for that, either directly or indirectly. States that implement a net tax cut will miss out on an equal amount of federal aid provided through the act's recovery fund.

HB2041 passed 91–5.

House Bill 2083, meanwhile, phases out the corporate income tax through increasing deductions over five years. Several Republican lawmakers, including House Speaker Charles McCall (R-Atoka), said eliminating the corporate income tax will make the state more competitive.

"Oklahoma is on the short list in the race for jobs. We have made progress, but we are not winning the deals," McCall said.

While all House Democrats except Rep. Regina Goodwin voted for the personal income tax bill, which included a longtime ask of theirs to make the Earned Income Tax Credit refundable again, the entire caucus opposed the corporate income tax bill.

Rep. Forrest Bennett (D-Oklahoma City) doubts eliminating taxes can overcome the state’s image on social issues.

"I understand there’s a fundamental difference about what we think is going to attract business in the state of Oklahoma. But I am telling you, if you’re not seeing what I’m seeing, if you’re not hearing what I’m hearing from the people who are already here … people want to leave because of the messages that we send from this building," Bennett said. "They don’t want to stay. They don’t want to invite their friends. They want to go. So, what kind of businesses are we bringing in?"

This week, the legislature has passed bills to ban abortion, crack down on protesters and arm teachers. Another bill to ban gender or sexual diversity training was briefly amended to require educators to out LGBTQ students to their parents, and a Republican lawmaker used the term "colored babies" in debate on an abortion bill.

HB2083 passed 74–20, with Rep. Tommy Hardin (R-Madill) joining the 19 Democrats opposed.