Senate Finance Committee Chairman Mike Mazzei has filed legislation to suspend a 0.25 percent income tax cut that went into effect Jan. 1.
The proposal is politically brave and fiscally prudent, and we support it.
Mazzei’s Senate Bill 1073 would back away from the cut in the state’s top personal income tax rate from 5.25 percent to 5 percent and specify that such a reduction cannot occur in a year in which a revenue failure has been declared. It also raises the standard for the next scheduled income tax cut 5 percent to 4.85 percent.
In December 2014, the state Equalization Board certified a small general revenue increase for the current budget year, triggering the tax cut, but less than two months later, the board revised its projections and estimated a $611 million decline in general revenue.
With Oklahoma’s economy spiraling along with petroleum prices, general revenue projections have continued to crash. Current estimates call for the state to end up 3 percent short of the amount needed to make the budget, necessitating painful cuts to all areas of general revenue funding, including public schools. The process of writing next year’s budget begins $900 million short of this year’s level.
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Mazzei, R-Tulsa, maintains that first estimate was wrong and the legal trigger for the tax cut was never met, and therefore no legislative supermajority is needed to suspend it. That seems like optimistic thinking to us, and unlikely to go unchallenged either politically or legally.
But the result would certainly be in the state’s best interest.
The tax cut did not cause the revenue failure, the state’s failure to anticipate the impact of foreign manipulation of oil prices on tax collections did. Suspending that tax cut won’t eliminate the problem, but it certainly will make it less destructive.
No politician wants to be the one who made people pay more taxes, and Mazzei is careful to say his proposal is only one option to consider. We salute him for putting out an idea that will be unpopular with many in his own party, and urge him and the full Legislature to accept reality, suspend the tax cut and start making the other choices necessary to shore up the state’s budget crisis.