Due to opposition from Oklahoma State Senate members, the 2024 legislative session ended without the passage of pro-growth income tax cuts, despite the best efforts of Governor Kevin Stitt and the Republican leadership in the House of Representatives.
But Stitt is not giving up and this week renewed his call for tax cuts after recent data showed that the state government is in a strong fiscal position.
“Oklahoma’s economy is booming,” Stitt wrote on X, the site formerly known as Twitter. “We exceeded revenue expectations this year and government savings accounts are at an all-time high. We have a revenue surplus, which means it’s time for tax cuts. Less taxes, less government spending – more money in your pocket!”
The Oklahoma Office of Management and Enterprise Services (OMES) recently reported that General Revenue Fund revenues for the 2024 fiscal year ending June 30 were approximately $8.5 billion, $177.7 million more than the estimate for the year.
The state ended fiscal year 2024 with deposits of $262.2 million and $91.3 million into the Revenue Stabilization Fund and the Constitutional Reserve (Rainy Day) Fund, respectively. The total balance of both funds is now just over $2 billion.
This trend continued into the start of the 2025 state fiscal year. General Revenue Fund revenues for the month of July – the first month of fiscal year 2025 – totaled $620 million, according to OMES, which was $10.8 million above the monthly estimate and $17 million above July 2023 revenues.
In January report A study released by the Legislative Office of Fiscal Transparency (LOFT) estimates that state government would need $6.14 billion in savings over five years if Oklahoma were to experience another economic downturn comparable to the “Great Recession” of 2008-2010.
However, LOFT found that Oklahoma had sufficient savings to cover these estimated costs. Total state government savings at the time were $8.9 billion. At the time, the state’s emergency fund had $1.274 billion, while the Revenue Stabilization Fund had $401 million, totaling $1.675 billion.
“You lost two Oklahomans yesterday who have lived here their entire lives because the legislature will not repeal the state income tax.” —Rob Taylor
In addition, at that time, state government had $6 billion in savings in accounts other than the Rainy Day Fund and Revenue Stabilization Fund, including over $2 billion in unspent funds from fiscal years 2021, 2022 and 2023, $3.5 billion in agency revolving funds and $372.5 million in the Federal Medical Assistance Percentage (FMAP) Preservation Fund, which prevents cuts to Medicaid.
Lawmakers tapped some of those savings during the 2024 session, but since the LOFT report was released, the Constitutional Reserve (Rainy Day) Fund and Revenue Stabilization Fund have increased by about $325 million.
Stitt has repeatedly tried to lower Oklahoma’s income tax rate, since lower rates typically lead to stronger economic growth. While he has enacted a quarter-percentage point cut since taking office as governor, Stitt is pushing for more.
In the 2024 session, Stitt called for cutting the personal income tax to 4.5 percent and preparing to eliminate that tax entirely by using growth revenues to offset additional cuts in coming years.
Oklahoma’s current top tax rate of 4.75 percent is higher than several neighboring countriesincluding Texas (which has no income tax), Arkansas (3.9 percent) and Colorado (4.4 percent). Missouri’s top tax rate of 4.8 percent is almost the same as Oklahoma’s. Among the neighboring states, only Kansas and New Mexico have significantly higher income tax rates than Oklahoma.
Internal Revenue Service (IRS) Data for 2022 show Oklahoma Rank 20th in the ratio of immigration to emigration of people earning over $200,000. But 11 of the 19 states with a better ratio of immigration of high-income people also had a lower income tax rate than Oklahoma, and seven of those 11 states had no income tax at all.
States that outperformed Oklahoma included neighboring Arkansas and Texas.
One person responding to Stitt’s call for tax cuts on X stressed that the state’s income tax continues to represent a cost and potential investment for state residents.
“You lost two Oklahomans yesterday who have lived there their entire lives because the legislature will not abolish the state income tax,” wrote Rob Taylor. “Our governor is now Kristi Noem. We appreciate your efforts, Governor Stitt, but we got a pretty hefty raise that we couldn’t turn down. OK, the legislators have to sort that out.”
Noem is governor of South Dakota, which has no income tax. According to IRS data, for every person earning over $200,000 who left South Dakota in 2022, 1.93 people earning that amount were added. That’s a ratio of almost two to one.
Accordingly Data Additionally, according to the Tax Foundation, South Dakota’s effective state and local tax rate is the fourth lowest in the country.
