ENID, Okla. —
Sen. Patrick Anderson has filed legislation to replace Oklahoma’s current income tax with a flat tax of 2.95 percent.
Anderson, R-Enid, said his plan, outlined in Senate Bill 240, is simple, fair and revenue neutral. He also said his plan would result in Oklahoma having the lowest income tax rate of the 43 states that impose an income tax.
SB 240 would eliminate all income tax deductions, credits and exemptions, Anderson said. Under the proposal, the state income tax rate would be cut nearly in half, and there would be no loss of revenue to state government, he said.
Oklahoma Tax Commission has reviewed the numbers and determined a flat rate of 2.95 percent would be revenue neutral, he said.
“The bottom line is if you replace our current tax system with a flat tax, then all taxpayers are treated equally,” Anderson said. “This flat tax offers tax relief to all Oklahomans, and it has no negative impact on the state budget. It would be a great selling point for businesses that are looking to relocate to our great state.”
House Democratic leaders came out against Anderson’s proposal.
“It may be revenue neutral to the state,” said House Democratic Leader Scott Inman, D-Del City, “but it’s devastating to the poor, to the disabled, to veterans and to retirees.”
While Anderson’s plan is revenue neutral, Inman said, taxes on some groups, including the poor, the disabled, veterans and retirees, will increase.
“House Democrats stand ready to defend hardworking Oklahomans and our retirees from the attacks we thought the Republican majority recognized they lost last session,” Inman said. “Many ... rely on these exemptions and deductions simply to make ends meet, but early estimates are that a flat tax would actually increase taxes on the majority of Oklahomans — upwards of two-thirds to three-quarters.
“In short, Anderson’s plan will shift the tax burden onto the backs of Oklahomans who can least afford it,” Inman said. “It may, in fact, be revenue neutral, but it lowers taxes for the rich while raising them for everyone else.”
Anderson said seven other states have a flat tax. They are Colorado, Illinois, Indiana, Massachusetts, Michigan, Pennsylvania and Utah. The seven states with no income tax are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.
Taxes have been a big issue with the Legislature lately. Last year, Gov. Mary Fallin proposed cutting the top income tax rate from 5.25 percent to 3.5 percent, beginning in 2013.
But rank-and-file members balked at the elimination of dozens of tax credits and exemptions Fallin proposed to offset much of the lost revenue, and a last-minute deal for a compromise tax cut fell apart in the waning days of the session.
Fallin and legislative leaders have said they would like to revisit the issue again this session, which begins in February.
The Associated Press contributed to this story.