Massive income and sales tax cut in Kansas could boost Oklahoma tax cut hopes
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Published: 10-May-2012

The Kansas state Legislature passed what analysts say will be the largest tax cut in state history on Thursday (May 10) – and that measure could influence events under the Capitol dome here in Oklahoma City.

The news about Kansas broke about 90 minutes after Oklahoma Governor Mary Fallin had pressed members of the Sooner state’s House and Senate to send her a “major” income tax cut this year.

Steve Anderson, formerly a staffer at the Oklahoma state finance office who now works as budget director for Kansas Governor Sam Brownback, says that state’s tax cuts will be the largest proportional reduction in history. 

Oklahoma Speaker of the House Kris Steele, given by CapitolBeatOK a brief sketch of developments in the Sunflower State, said (during the Noon Hour) that he and colleagues remain “determined to reduce the tax burden” – while funding core services of state government.

Steele said the Legislature has determined there is actually about $265 million more to appropriate this year than last, and repeated his belief that “a portion of that should go back to the taxpayers.” 

Steele, in his weekly encounter with members of the Capitol press corps, said negotiations over the budget and tax issues had brought the key leaders “closer than ever” to an agreement. He added that “realistically” the parameters of a tax and budget accord need to be in place by a week from tomorrow – that is, Friday, May 18.

Steele told reporters he had alerted members of the House to be prepared to work on Friday next week so progress can continue on remaining laws that need to clear before the 2012 session’s end.

Earlier Thursday, Senate President Pro Tem Brian Bingman said discussions on budget and taxes remain “very fluid.” He said the Republican caucus “has a position, and we’ve all talked” about the tax and budget issues. 

In response to a question from CapitolBeatOK concerning potential new life for reforms of tax credits and exemptions, as one means to free up resources for tax reduction, Bingman said there is “always a chance.” He seemed to anticipate Steele’s comments in saying negotiations among the chief executive, speaker and himself left them “not that far off” from an accord.

Steele and Bingman each indicated the state is looking at a total bond issue of $160 million to perhaps $200 million, spread over three to five years. However, each man  restated past views that majority sentiment for a bond exists only on state Capitol improvements, although both the American Indian Cultural Center in Oklahoma City and the Pop Art facility in Tulsa continue to come up in deliberations over possible bond issues. 

Concerning another major spending item, Steele and Bingman said they believe there will be agreement to begin paying $294 million “owed” for oil industry deep drilling incentives – presumably with installments under $100 million a year over a three year period. Other spending issues of note include approximately $3.5 million for the first year of implementation of the justice reinvestment initiative, and as much as $31 million for the first year of implementation of Human Service reforms. 

(Note: A lower figure, $25 million, has also been cited as a possible first-year figure for DHS reforms, which ultimately, after full implementation of the Pinnacle Plan, will add roughly $150 million to the DHS budget. Although the three “co-Neutrals” have not yet agreed to the DHS reforms’ details, Steele reported today that negotiations remain on track, and that the oft-mentioned $25 million to $31 million is still a reasonable estimate of first-year costs.)

After the signing ceremony for House Bill 3052, the justice reinvestment initiative, Governor Fallin restated her support for a major income tax cut, saying she hoped legislators in both chambers will agree to send her such legislation.  Fallin told reporters, including CapitolBeatOK, it was time for the Legislature to “talk the talk, and walk the walk.” 

News stories in recent days have indicated an income tax rate reduction to 4.95 percent (the current top rate is 5.25 percent) is possible, while hopes for much greater reductions have faded. The news from Kansas could change that picture. 

In Topeka, the state House approved a measure to slash income and sales taxes by $233 million beginning July 1. Annual relief could grow to $911 million over four years. While the measure is headed to Brownback now, there is renewed discussion of limiting or clarifying some provisions. 

Renewed advocacy for a “major” income tax reduction in Oklahoma came less than 24 hours after a debate between supply-side economist Arthur Laffer and a defender of Oklahoma’s income tax status quo, Mickey Hepner of the University of Central Oklahoma.

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