Oklahoma’s Governor is pursuing a radical overhaul in the Sooner State’s personal income tax structure and Arkansas policy makers say the Natural State will feel the pressure to respond.
Earlier this month, Oklahoma Governor Mary Fallin (R) proposed the Oklahoma Tax Reduction and Simplification Act with a goal of enacting it by Jan. 1, 2013.
“Our plan is bold. It cuts income taxes by a significant amount for a majority of Oklahomans in every tax bracket and of every income level,” Fallin has said. “The Oklahoma Tax Reduction and Simplification Act is what I like to call a ‘game-changer.’”
In short, the proposed law reduces Oklahoma’s seven-tier income tax system to three. Eventually, the state would phase out its income tax by a quarter percent annually assuming 5% yearly revenue growth.
Border states Kansas and Missouri are debating reductions and eliminations to their personal income tax structures. Elimination of Oklahoma’s income tax — although that is not what Fallin has initially proposed — could create tax choices for Fort Smith, Siloam Springs and other Arkansas cities bordering Oklahoma.
Arkansas’ individual income tax collections account for nearly 47% of overall gross state revenue and it has been the strongest source of revenue growth during the past 18 months.
State policy makers, like Rep. Davy Carter (R-Cabot) and State Sen. Larry Teague (D-Nashville) contend that Oklahoma’s efforts will increase pressure on Arkansas to review its tax structure.
“I’m more concerned about Arkansas than Oklahoma, but it’s hard to ignore what our surrounding states are doing regarding tax policy. We must be competitive,” said Carter, chairman of Arkansas’ House Revenue and Tax Committee, which will review Arkansas’ sales tax exemptions beginning with an organizational meeting as early as next week.
“I think there’s interest and appetite for doing something with our whole tax structure here in Arkansas. What we don’t have is any surplus big enough to move around and get us over the hump,” said Teague, chairman of the Senate Revenue and Tax panel. “It (the Oklahoma plan) certainly will create some more interest in remaining competitive with our neighboring states.”
Read more of Carter’s and Teague’s comments, as well as details of Fallin’s plan from our content partner, The City Wire.