Patrick B. McGuigan
Oklahoma Governor Mary Fallin plans to “build upon the momentum” Oklahoma has established economically over the past year, promising to unveil next Monday “one of the boldest tax reforms in the country.”
Fallin’s comments came during the annual Associated Press legislative briefing, held this morning (Thursday, February 2) at the state Capitol in Oklahoma City. Next Monday, she will deliver the annual State of the State address and submit to legislators the annual executive budget.
The chief executive said “this is a game-changing moment for our state,” as she promised to seek “a fairer, flatter and simpler” income tax system. Fallin intends for her plan to have “immediate and significant” impact.
Her proposal to close state tax loopholes and provide a specific list of recommended tax credits to limit or eliminate will be, she said, part of a plan designed “eventually to eliminate the state income tax.” She said modernization steps that are saving millions of dollars would also contribute to a revenue pool to start the tax reductions.
Referring to some tax credits as “carve outs “ and “loopholes,” Fallin acknowledged “all the great work that has gone on” in legislative task forces focused on business incentives and tax credits. Still, she said her staff had studied the issue for “the last several months” and she would be offering her own income tax rate phase out plan.
Fallin declined to provide details on how long an income tax phase out process could run, but told the Capitol press cops it would include – as other recent phased reductions in the Oklahoma income tax rate have – a “growth trigger” tied to the state’s economic growth.
Fallin said her plan will reduce the number of income tax brackets from seven to three. The conservative Republican asserted, “My goal is not to balance the budget on the backs of the poor, and not to starve state government services.”
Dr. Arthur Laffer, the visionary economist who made the case for Ronald Reagan’s historic federal income tax rate cuts in the early 1980s, has studied the potential impact of an Oklahoma state income tax phase out.
In an econometric projection using “dynamic scoring” in state tax revenue projections, Dr. Laffer’s analysis for the Oklahoma Council of Public Affairs anticipates that staggering a phase out process over a decade would allow for slow growth in government coinciding with an economic growth spurt and significant new job creation.
Gov. Fallin said her office had over the past year has surveyed 4,000 state businesses, and were told that lower personal and sales taxes -- combined with transportation infrastructure improvements -- were the best ways to improve the state’s economic picture.