NewsOK: Oklahoma City News, Sports, Weather & Entertainment

Oklahoma House passes McCall’s tax measures

House Speaker Charles McCall, right, congratulates Gov. Kevin Stitt on Feb. 1 after his State of the State address. [Chris Landsberger/The Oklahoman] [CHRIS LANDSBERGER, CHRIS LANDSBERGER]
House Speaker Charles McCall, right, congratulates Gov. Kevin Stitt on Feb. 1 after his State of the State address. [Chris Landsberger/The Oklahoman] [CHRIS LANDSBERGER, CHRIS LANDSBERGER]

The Oklahoma House on Thursday passed two tax reform measures introduced by House Speaker Charles McCall.

A proposal to reduce personal income tax garnered bipartisan support, largely because the bill included language to reinstate the refundable aspect of the earned income tax credit.

House Republicans also overwhelmingly approved a bill to phase out over five years Oklahoma’s corporate income tax, which McCall described as “a bold idea” to attract more businesses to the state.

“Oklahoma is on the short list in the race for jobs,” he said in a rare speech from the House floor. “We have made progress, but we are not winning the deals. These bills help get Oklahoma off the short end of the short list.”

The last time McCall gave a floor speech was in 2018 when the Legislature approved a rare package of bills to raise taxes in order to fund teacher pay raises. Oklahoma is at a similar crossroads now, he said.

McCall said his House Bill 2083 could help Oklahoma better compete with Texas when it comes to attracting businesses and jobs. Texas is one of just a few states that do not have a corporate income tax, but, unlike Oklahoma, levies a tax on the gross receipts of businesses.

The legislation would apply only to C corporations that currently pay a 6% corporate income tax on net income.

HB 2083 would result in a $32.3 million decrease in tax collections in the upcoming fiscal year. After the corporate income tax is fully phased out, the bill would result in a $377 million annual decrease in tax collections.

Although, Rep. Kevin Wallace, R-Wellston, who presented the bill, said phasing out the corporate income tax rate would likely attract more businesses, and taxpayers to Oklahoma, which would offset the declines in tax collections. He also said the state's corporate income tax is volatile and hard to project years in advance.

House Democrats argued corporations don’t need additional tax breaks. They also made a broader argument that the best way to attract businesses to Oklahoma is to invest in the state’s core services, like education, infrastructure and health and mental health services.

Rep. Regina Goodwin, D-Tulsa, said it’s as though the Legislature takes one step forward and three steps back. The state’s core services are underfunded and have been for years, she said.

“There are times to cut taxes and there are times to strategically invest and I’m questioning whether this is the right time to be cutting taxes when I think now is the opportunity for us to make strategic investments," said Rep. Meloyde Blancett, D-Tulsa.

Despite their opposition to the corporate tax cut, most House Democrats approved House Bill 2041 to provide personal income tax relief to all Oklahomans. The bill passed on a vote of 91-5.

Under the legislation, the top income tax rate most taxpayers pay would be reduced by .25% through a tax credit structure.

Oklahomans would receive, on average, $113 in tax relief under the bill, said a spokesman for McCall.

The bill also would restore the refundable aspect of Oklahoma's earned income tax credit, which state lawmakers eliminated in 2016 in order to fill a budget shortfall. Restoring the credit would cost the state roughly $25 million.

For years, House Democrats have pushed for the refundable piece to be restored.

"While this tax credit has been important for working families for a long time, its restoration could not be more timely as many families across our state are still feeling the economic effects of the COVID-19 pandemic," said House Minority Leader Emily Virgin, D-Norman.

HB 2041 would decrease tax collections by $71 million in the upcoming fiscal year, and $180 million the following year.

McCall said he wanted to provide tax relief to Oklahomans of all income levels following the pandemic.

The state has more than $1 billion in additional revenue to spend in the upcoming fiscal year, which McCall said makes it the ideal time for tax reform.

Should the state's financial picture worsen in later years, McCall said the tax relief bills can be undone with a simple majority vote of the Legislature, as opposed to the three-fourths supermajority required to raise taxes.

“If we think we can emerge stronger under the same policies, tactics and the same old processes, we are fooling ourselves,” he said. “Sitting on our hands, thinking things will just fix themselves, is not meeting the moment. We need to jump-start the economy, not wait for it to jump-start itself.”

The bills now go to the Senate for approval. Earlier this week, McCall said the governor is "very interested" in both measures.

In his State of the State speech and recent speaking engagements, Gov. Kevin Stitt has hinted that he's supportive of tax reform

"It’s kind of a novel concept," Stitt said in a recent speech. "Let’s give the money back to the taxpayers. It will spur economic growth."