Okla. Tax Reform Bills Make Their Way Through Committee

Lawmakers have been busy this session working on legislation that will help improve the state’s economy, and work to make Oklahoma more competitive for outside residents and companies. 

A handful of bills aimed at lowering taxes passed through the Senate Finance Committee this week, which many say could put the state in a better position to compete with our neighbors.

“Our main focus is making Oklahoma's tax code more competitive overall,” said Chad Warmington, CEO of the State Chamber of Oklahoma.

Warmington and his office have worked closely with legislators this session on tax reform bills for the state. Four of those bills passed through the Senate Finance Committee this week that are aimed at reshaping the state’s tax system.

“Pretty confident that we think these can get done and across the finish line,” said Warmington.

House Bill 2285 lowers state income tax from 4.75% to 4.5% and raises the standard deductions.

“It actually takes Oklahoma's 6 income tax brackets and shrinks it down to one, but it also raises the standard deductions; so, people at the lower end of the scale have a better benefit,” said Warmington. “We think this has the potential to raise us into the top 10 in ranking in terms of our overall competitiveness in our tax code.”

For the past three years, Oklahoma has been passed up for big economic opportunities such as the LEAD Act that would have brought millions in revenue to the state along with thousands of jobs. This kind of tax reform has the potential to make Oklahoma more attractive to some of these big companies

“One of the things we don't want to do is just be eliminated because our tax code is more complicated,” said Warmington.

While some of our neighboring states, like Texas, don't have an income tax at all; they have higher sales taxes and property taxes. 

“You would have to raise taxes in other places to offset the revenue you would give up in personal income tax,” said Warmington.

Warmington says this proposed legislation is a more balanced approach than eliminating the personal income tax altogether.

“Yes, we're not going to 0, but it's going to be better, it's going to be more competitive and it's going to be fairer with raising the standard deduction. That is just going to be better for everyone,” said Warmington.

The bill dealing with the franchise tax that’s levied on businesses are also passing through. HB2695 would eliminate the franchise tax and is expected to decrease state revenues by over $55 million for 2024.

"More than anything, it's just a pain to comply with; and it doesn't generate a lot of revenue. So, we're hoping to eliminate that this year, so it makes it easier for businesses to comply with Oklahoma tax law,” said Warmington.

House Bill 1645 would eliminate the "throwback rule". This means people in the state who are subject to Oklahoma corporate income tax would no longer have to include the income from those sales in their state sales factor.

All four bills passed through the Senate Finance Committee and are now headed to Senate Appropriations.