A little more than half of Oklahoma taxpayers would see a tax cut next year for an average annual savings of $60 under a Republican-backed income tax plan, according to an analysis of the proposal released on Friday.
The Oklahoma Tax Commission analysis shows 54 percent of Oklahoma tax filers would get a tax cut, while an additional 21 percent would see no change in their tax liability. Nearly 25 percent of Oklahomans would actually have an increase in their tax liability under the plan.
"This is politics at its worst," said House Democratic Leader Rep. Scott Inman, D-Del City. "You've got a group of Republican politicians who believe that the best way to get re-elected is to sell a tax cut to the people of Oklahoma, whether it's beneficial for the state or not."
The proposal is expected to cost the state $32.7 million in the upcoming fiscal year that begins July 1, and $102 million in fiscal year 2014 after the cut is implemented for a full fiscal year, according to figures from the Office of State Finance.
Republican Gov. Mary Fallin and legislative leaders announced an agreement on the plan Thursday to slash Oklahoma's top income tax rate from 5.25 percent to 4.8 percent next year. The proposal cleared its first hurdle Friday, when a House conference committee approved it. Both Democrats on the panel opposed it. The measure is expected to be considered Monday by a Senate committee before it returns to the full House for a vote.
The Tax Commission's analysis of the proposal shows the greatest percentage of taxpayers who would actually see a tax decrease -- about 87 percent -- are those earning between $150,000 and $499,000. The largest percentage facing a tax increase are those with between $10,000 and $16,000 in annual taxable income. The analysis shows 61 percent, or more than 18,000 tax filers, who earn between $12,000 and $14,000 annually would see their tax liability increase.
"These numbers show that the wealthiest Oklahomans will benefit disproportionately from the proposed tax cuts -- a full 40 percent of the total tax cut will go to those making over $200,000 a year," said David Blatt, the director of the Oklahoma Policy Institute, a Tulsa-based think-tank that supports funding for state services. "At the same time, some Oklahomans will face at least a small increase in state taxes.
"Of greater concern to us, however, is that this proposal would produce less revenue at a time when schools and other core services are struggling to recover from years of crippling budget cuts."
A spokesman for the governor noted that many of the people in low-income brackets actually receive a tax rebate that is equal to more than they paid in income taxes.
"People on the very lowest end of the income spectrum actually aren't taxpayers," said Fallin spokesman Alex Weintz. "They file a tax return and they receive a refund that's greater than what they paid. In the strictest sense, it's not possible to cut their taxes."
House Speaker Kris Steele, who introduced the measure to the House panel on Friday, said he believes it will pass the full House, though he acknowledged the bill will face some resistance.
"If each one of us individually were given a task to draw up a tax reform plan for Oklahoma, there would be 101 different proposals on the table," said Steele, R-Shawnee. "It's not a product that everyone is happy with, obviously, but it represents a compromise. It still allows us to reduce our taxes in a significant manner, in a responsible way, and pay for core services of government."
Republicans outnumber Democrats 67-31 in the House, but some Republicans also aren't ready to embrace a cut in the income tax. A bill needs 51 votes to pass.
"It hasn't passed yet," said Rep. David Dank, R-Oklahoma City. "You're not going to get any Democratic votes, and you've got a lot of disgruntled Republicans that either didn't get enough or don't think we need a tax cut, period, at this time."
While many of those in low-income brackets won't get a tax reduction, their increase in tax liability is minimal. The analysis shows the highest average increase in tax liability is $10 annually for those in the $10,000 to $12,000 income bracket. Those numbers are reflected in a decline in the average rebate from $59 to $49.
"It's a middle-class tax cut," Weintz, the governor's spokesman, said. "People making $30,000, $40,000, $50,000, filers in that range are going to see a significant tax cut, and that's how it's designed. A tax cut is a tax cut, and it's more dollars in the pockets of Oklahoma taxpayers, which was our goal."
House Bill 3061: http://is.gd/vHjOfG
Sean Murphy can be reached at www.twitter.com/apseanmurphy