- Associated Press - Thursday, March 6, 2014

OKLAHOMA CITY (AP) - A plan to cut both Oklahoma’s corporate and individual income tax rates once certain revenue triggers are reached cleared the Oklahoma House on Thursday over the objections of Democrats who contend the resulting loss of funds will decimate critical state services such as education, public safety and health care.

The House voted 57-34 for the bill that includes triggers for both cuts that would first require revenue collections to grow by enough to offset the lost revenue to the state. Because of that provision, the earliest that either tax cut would take effect is Jan. 1, 2016.

“If we have growth, we get an income tax reduction. If we don’t, we don’t get an income tax reduction,” said Rep. Earl Sears, R-Bartlesville, the author of the bill. “I don’t think this is too far reaching. I personally believe this is a very modest income tax reduction.”

Under the proposal, Oklahoma’s top personal income tax rate would drop from 5.25 percent to 5 percent if total income tax collections over the previous year grew by enough to cover the cost of the cut, which is currently estimated at about $147 million.

The measure also includes a separate trigger that would drop the corporate income tax rate from 6 percent to 5 percent if overall corporate income tax collections increased enough to pay for the cut, which is projected to cost the state about $53 million annually.

“We just felt like that (corporate income tax reduction) needed to be a part of the discussion,” said House Speaker Jeff Hickman. “A lot of people argue that is just as important, if not more so, in terms of economic development.”

The Senate has passed a separate bill to cut the income tax rate from 5.25 percent to 5 percent once overall collections to the state’s General Revenue Fund, the main operating fund for state government, return to 2013 levels. That bill has a second cut to 4.85 percent triggered by growth in overall income tax collections.

Ultimately, Republican leaders in the House and Senate will negotiate with Gov. Mary Fallin to determine what the final tax cut plan looks like, but it’s clear both sides favor a cut that won’t be triggered until state revenue collections improve.

“Obviously we’re going to have to iron out those differences at some point,” said Hickman, R-Fairview. “I would be surprised if we don’t get a tax cut on the governor’s desk this session that’s similar to one or the other.”

Fallin, who has been calling for a reduction in the state’s income tax rate for three years, praised the House on Thursday for passing the bill.

“Reducing the income tax allows working Oklahomans to keep more of their hard earned money while helping to attract and retain jobs and businesses,” Fallin said in a statement. “It is an important part of our strategy to grow our economy and continue Oklahoma’s forward momentum.”

But Democrats argued it’s irresponsible to implement any reduction in taxes when funding for state services such as K-12 education and public safety are woefully inadequate.

“We don’t seem to understand that it takes investment in core functions of government to make this state great,” said House Democratic Leader Scott Inman, D-Oklahoma City. “No one out here believes education in Oklahoma is adequately funded. We have 450 fewer correctional officers today than we had five years ago.

“Yet we decide to run an income tax cut. I don’t get it. It’s fiscally irresponsible.”

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