Bills to slash grocery, income taxes advance
Proposals to eliminate the state sales tax on groceries and cut individual income taxes advanced to the full House on Thursday, as lawmakers took an early and bipartisan step toward giving a break to Oklahoma consumers hit hard by inflation.
The House Appropriations and Budget Committee unanimously approved a bill to eliminate the state portion of the sales tax on groceries, which would effectively cut the cost of food and food ingredients at Oklahoma stores by 4.5%.
The panel also cleared two separate proposals for reducing personal income tax rates – one that would cut the top rate by one-quarter of a percentage point and another that would cut the top rate by one-half of a percentage point. Both would lead to modest savings for middle income earners. Most Democrats voted against the income tax proposals.
The three tax bills were authored by House Speaker Charles McCall, R-Atoka, and will serve as vehicles for negotiations with the Senate and Gov. Kevin Stitt. The governor strongly favors eliminating the state sales tax on groceries – which would still leave locally levied sales taxes on food and food ingredients – while Senate President Pro Tem Greg Treat, R-Oklahoma City, has not committed to specific tax cuts.
McCall said Thursday, “The House is once again leading the conversation when it comes to passing meaningful inflation relief for the citizens of Oklahoma.
“Last session, and again during a special session, the House passed multiple tax relief bills that could have accomplished this important task. We have again provided a number of bills that would allow Oklahomans to receive this much-needed relief and are currently engaged in talks with our colleagues in the Senate on tax reform. The House is hopeful that the Senate will advance one or more of these bills to the governor’s desk.”
Democratic leaders have endorsed eliminating the state sales tax on groceries, but have cautioned against other tax cuts and prefer to use available revenue to boost spending on education and other state services.
The proposed grocery and income tax cuts would reduce state revenue by up to $552 million in the next fiscal year, depending on the size of the income tax rate cut.
That cut in revenue would come on top of the estimated reduction of $300 million a year from proposed refundable tax credits for parents who educate their children at home or send their kids to private schools. The House has approved those credits, but the Senate has not considered them.
In his address to the Legislature last month, the governor cited the state’s $1.8 billion surplus and $4 billion savings account and called for eliminating the state sales tax on groceries and reducing the top personal income tax rate from 4.75% to 3.99%.
Neither of the income tax bills cleared on Thursday would reduce the rate that far. One would reduce it to 4.5% and the other would reduce it to 4.25%.
Currently a married couple filing jointly with taxable income above $12,201 pays $224.50 and, then, 4.75% on the income above $12,200.
Under the proposal to reduce the rate by half a percentage point, the couple would pay $168.50 and 4.25% on the income over $12,200. On $50,000 of additional income, the savings would be $250.
Under the proposal to reduce the rate by one-quarter of a percentage point, the couple would pay $194 and 4.5% on the income over $12,200. On $50,000 of additional income, the savings would be $125.