Income tax cut passes House panel
Associated Press
Appeared in the Oklahoman, March 8, 2006
A legislative panel voted to cut Oklahoma's top income tax rate for the third time in as many years Wednesday when it approved a $130 million cut in the state income tax.
The House Revenue and Taxation Committee also narrowly passed a so-called taxpayer bill of rights measure its author said is an alternative to an initiative petition on TABOR that is being challenged in the Oklahoma Supreme Court.
Without opposition, committee members voted to cut the maximum income tax rate from 6.25 percent to 5.85 percent. The measure now goes to the full House for a vote.
Last year, the state's top marginal rate was cut from 6.65 percent, a $108 million cut in its first full year of implementation. The rate was reduced from 7 percent in 2004 by a statewide vote of the people.
The income tax cut is a priority of Republican House Speaker Todd Hiett, who also authored last year's income tax cut. The committee's chairman, Rep. Kevin Calvey, R-Del City, said revenue from Oklahoma's economic growth will more than compensate for the drop in tax revenue.
The Democrat-controlled Senate Finance Committee has approved a $480 million cut in state income taxes, from a top rate of 6.25 percent to 4.9 percent. That measure is pending in the Senate.
Although no one voted against Hiett's bill, Rep. Richard Morrissette, D-Oklahoma City, said the drop in state revenue could eventually affect state services if there is a downturn in economic activity.
Committee members voted 5-4 to send the TABOR bill to the House floor for a vote. The bill calls for a vote of the people on a proposed constitutional amendment that would limit increases in state and local government spending to the rate of inflation plus population growth.
The measure's author, Rep. Ken Miller, R-Edmond, said his bill is an alternative to the initiative petition and uses a different formula to cap spending than the one proposed in State Question 726.
The initiative petition relies upon the consumer price index as a formula for inflation. But Miller, associate professor of economics at Oklahoma Christian University, said government does not provide the same services as those measured in the CPI.
"Our pie chart is very different than a household pie chart," Miller said. State government spends far more on health care and education than an average household.
"It's a small component in a household budget. It's a very large component in a state budget," he said.
Miller said TABOR will provide stability and efficiency in state government. But critics said it could result in problems similar to those in Colorado, where voters last year suspended TABOR and agreed to relinquish more than $3 billion in tax refunds over five years.
"I feel government is a safety net," said Rep. Joe Dorman, D-Rush Springs. "All this is going to do is poke holes in the safety net where some of my constituents are going to fall through."
In other action, the committee:
- Approved a charitable tax credit that would give individuals a $200 tax credit and couples a $300 tax credit in 2007 if they give charitable donation than they did in 2006 or the first year they itemized their income taxes.
- Passed a bill that would gradually reduce the current 4.5 percent tax on groceries to 0.25 percent by 2011.
