5.20.25 – Oklahoma Council of Public Affairs
On a vote of 74-19, the Oklahoma House of Representatives passed a plan to lower the income tax to 4.5% and eventually eliminate it altogether.
Members of the Oklahoma House of Representatives have voted to cut Oklahoma’s top income-tax rate, which applies to most workers, to 4.5 percent and put the tax on a gradual path to complete elimination.
State Rep. Mark Lepak, a Claremore Republican who carried the bill on the House floor, said it will benefit all workers, but most importantly will help grow Oklahoma’s economy by reducing the state penalty on work and investment.
“I think the real benefit of reducing the income tax is the economic activity that it will generate,” Lepak said.
House Bill 2764 would cut Oklahoma’s top income-tax rate to 4.5 percent starting in 2026 and also reduce the number of tax brackets from six to four.
Supporters noted that the elimination of tax brackets that apply to the state’s lowest earners ensures benefits to all citizens with a job.
“It is a tax cut to every Oklahoman that pays taxes,” said House Speaker Kyle Hilbert, R-Bristow. “Every Oklahoman that pays income taxes is getting a tax cut from this bill.”
The bill also mandates future reductions in the top income-tax rate when state tax collections grow by a specific amount, allowing for that process to be repeated again and again until the personal income tax is completely repealed in the future.
To trigger a rate reduction, total state tax collections must increase by an amount that exceeds the prior highest-year spending total by an amount equal to the estimated cost of another quarter-point tax cut multiplied by 1.25 percent.
HB 2764 is expected to reduce Oklahomans’ tax payments by a combined $340.5 million annually.
Lepak noted that, in recent decades, total state tax collections have increased by about 4 percent per year on average, even as lawmakers reduced the state income tax from 7 percent to the current rate of 4.75 percent.
He noted that personal income-tax collections have increased by 18 percent since 2021, even though the rate was reduced by a quarter-point during that time, falling from 5 percent to the current rate of 4.75 percent.
Opponents Prefer Government Spending
Opponents decried the tax-cut bill in apparently contradictory terms, arguing that it was both too small to make a difference for most families and also so large that it would cause major financial problems for state government.
“The reality of this is that while it will have a small amount of savings for those in poverty, it is not sufficient enough to really have an impact on their circumstances,” said state Rep. Michelle McCane, D-Tulsa.
State Rep. Andy Fugate, D-Oklahoma City, dismissed income-tax cuts as something cheered on only by “rich fat-cat donors.”
State Rep. Forrest Bennett, D-Oklahoma City, said the tax break was being advanced for the benefit of “people who make $683,501 and above, the top one percent in Oklahoma.”
Opponents argued lawmakers should instead increase government spending rather than provide tax breaks to working Oklahomans.
“This, again, will cut down on our investment,” said state Rep. Ellen Pogemiller, D-Oklahoma City.
“I think the real benefit of reducing the income tax is the economic activity that it will generate.” —State Rep. Mark Lepak (R-Claremore)
“Weather events are getting more extreme, and people are getting sicker, and those are things that the state, one way or another, is going to have to pay for,” Bennett said.
Lepak countered that SB 2764 is designed to benefit Oklahomans who face financial struggles today by creating more opportunities for them in the near future.
“Is enlarging the role of government a good growth strategy?” Lepak asked. “I don’t think so. I think creating a better economy is a better growth strategy, which helps lift people out of poverty.”
Several opponents referenced a recent poll by the State Chamber, the Oklahoma Business Roundtable, and the State Chamber Research Foundation, which had certain questions that indicated business owners preferred various types of government spending increases to tax reductions.
“There’s been no substantial evidence that I believe people want a tax cut, that our businesses are asking for this tax cut,” Pogemiller said.
But that same State Chamber poll also showed that 58 percent of business respondents supported using growth revenue to gradually reduce the personal income tax, with another 27 percent supportive of immediate elimination of the tax. Only 13 percent of respondents said there is no need to reduce the state’s personal income tax rate.
Supporters said the Oklahoma government can easily afford the tax reduction and that state workers deserve to keep more of their wages.
Hilbert noted Oklahoma will still have record savings of $3.5 billion in reserve even after accounting for the tax cut in HB 2764.
“When you’re sitting on that level of surplus, that’s good, because as a state you can conservatively manage where you want to go for the future,” Hilbert said. “But at the same time, you reach a point as a state where you have so much surplus you start to ask, ‘Is it time we restore some of that back to the taxpayers to let them keep a little bit more of their hard-earned money?”
Oklahoma’s current 4.75 percent personal income tax rate is among the highest in the region.
Texas has no personal income tax, while Colorado imposes a 4.4 percent rate. Officials in Arkansas have cut their rate to 3.9 percent. The top rate in Missouri fell to 4.7 percent in January. Louisiana has cut its income-tax rate to 3 percent. Officials in Kansas recently voted to cut their income-tax rate to 4 percent.
Among bordering states, only New Mexico is expected to have a higher personal income-tax rate than Oklahoma if SB 2764 does not become law.
And other states across the country also have much lower personal income-tax rates.
Lepak noted that Mississippi currently has a top income-tax rate of 4.4 percent and has adopted a plan to gradually phase out the tax. Kentucky will have a top rate of 3.5 percent in 2026 and is on a path to zero. Iowa has a top rate of 3.8 percent. Nebraska has a top rate of 3.99 percent. Ohio has a top rate of 3.5 percent. West Virginia officials have put their income tax on a path to zero.
Supporters of SB 2764 said Oklahoma cannot afford to bring up the rear in that multi-state competition.
“We’re certainly falling behind other states that are working on tax cuts,” said state Rep. Gabe Woolley, R-Broken Arrow.
While stressing that income-tax cuts fuel state economic growth and job creation, Lepak also urged his colleagues to think of struggling families when they cast their vote.
“When I say ‘economy,’ I’m talking about the opportunity for everybody in this state to better themselves from an employment perspective, from an income perspective—because there are jobs,” Lepak said. “The best way out of poverty is more jobs that pay better. The only way you can get more jobs is to attract businesses to come here or to grow your own in a way that creates those jobs.”
HB 2764 passed the Oklahoma House of Representatives on a 74-19 vote that broke mostly along party lines, with Republicans in support. The bill now proceeds to the Oklahoma Senate.
Ray Carter
Director, Center for Independent Journalism