With less than four weeks to go until the 2025 legislative session convenes, two Republican lawmakers have filed bills to gradually eliminate Oklahoma’s personal income tax. House Bill 1009 by Jay Steagall, R-Yukon, would incrementally reduce the tax to 0% by 2035. Senate Bill 1 by Michael Bergstrom, R-Adair, proposes a similar timeframe, but makes future cuts dependent on increases in state revenue.
“This measured, step-by-step approach ensures that our state remains on a sound financial footing while giving families and businesses more of their hard-earned money back,” Bergstrom said in a written statement.
Similar bills filed ahead of the 2024 legislative session weren’t seriously considered, but the dynamics will be different this spring. Both the House and Senate have new leaders, and Republican primary voters showed strong support for candidates vowing to cut income tax rates.
Gov. Kevin Stitt has been among the most vocal proponents of eliminating the state income tax, arguing that it would make the state more attractive for businesses and families fleeing higher cost-of-living states. Seven states, including neighboring Texas, don’t impose an income tax.
States with no income tax typically make up for the lost revenue by increasing other kinds of taxes or cutting services. For instance, a study by The Tax Foundation showed that Texas had an effective state property tax rate of 1.47% in 2022, nearly double Oklahoma’s rate of 0.76%. Texas also has a higher state sales tax rate of 6.25%, compared to Oklahoma’s 4.50%.
Oklahoma Democrats have consistently opposed income tax cut proposals in recent sessions, arguing that the change would disproportionately benefit the wealthy and jeopardize the state’s financial standing. While the state has built up more than $1 billion in surplus funds in recent years, Oklahoma faced a $1.4 billion shortfall as recently as April 2020.