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Stitt calls for more tax cuts and path to zero individual income tax

Oklahoma Gov. Kevin Stitt gestures as he delivers his State of the State address Monday, Feb. 6, 2023, in Oklahoma City.
Sue Ogrocki
/
AP
Oklahoma Gov. Kevin Stitt gestures as he delivers his State of the State address Monday, Feb. 6, 2023, in Oklahoma City.

Governor Kevin Stitt delivers his next to last State of the State address to a joint session of the Oklahoma legislature Monday, airing live on KGOU at 12:30 p.m.

TRANSCRIPT

Dick Pryor: Capitol Insider sponsored by United for Oklahoma - Tribal Nations Building Unity and Economic Strength to Benefit All Oklahomans. More at unitedforoklahoma.com. Oklahoma Thrives Together.

Shawn Ashley: This is Capitol Insider - taking you inside politics, policy and government in Oklahoma. I'm Dick Pryor with Quorum Call publisher Shawn Ashley. Governor Kevin Stitt will deliver his 2025 State of the State address this Monday before a joint session of the Oklahoma legislature. It's also the day when he will present his executive budget. And then the session shifts into gear. Shawn, the governor held a press conference on Wednesday. Did he tip off what he will talk about in his speech?

Shawn Ashley: Governor Stitt said he wants to rally Oklahomans around four broad pillars that he believes everyone can agree on. Those pillars include protecting Oklahoma taxpayers, including reducing the individual income tax, making Oklahoma the best state in the nation for business, safeguarding the state's financial savings, and protecting the Oklahoma way of life.

Dick Pryor: As for the tax cut, what does he want to do?

Shawn Ashley: Stitt is advocating what he calls a half and a path, a one-half percentage point reduction in the individual income tax and a path to a zero income tax rate.

Shawn Ashley: Has the governor given details about how that path would be accomplished and when?

Shawn Ashley: Governor Stitt's proposal, which is also reflected in a number of bills filed for consideration this year, would reduce the individual income tax by a certain percentage, usually one quarter of 1%, following a year in which the state's general revenue fund grew - usually beyond a specific dollar amount. For example, some of the bills set the growth level at $300 million. So, if General Revenue Fund collections grew more than that, it would trigger an individual income tax reduction. And that's a word - trigger - I expect we'll be hearing and seeing a lot this year. Stitt has said he would like to see the individual income tax eliminated over a ten-year period, and every quarter point reduction in the individual income tax reduces general revenue fund collections by nearly $300 million per year.

Dick Pryor: Shawn, the individual income tax is the largest source of general revenue for the state of Oklahoma. So where does the governor see that growth revenue coming from if the individual income tax were eliminated?

Shawn Ashley: Stitt argues that some of the money taxpayers do not pay in income taxes will still end up in the state treasury because it will be spent in some other taxable way. If someone buys a new refrigerator, for example, that's subject to the sales tax. The idea is the income tax revenue being eliminated will be replaced with increased revenue in other areas. But the problem is most of the discussion and many of the bills do not exclude individual income tax revenue from the calculation of revenue growth. That is going to artificially increase the amount of growth. The last time revenue growth exceeded $300 million or our trigger level was in fiscal year 2023 and more than 25% of that fiscal year’s revenue growth came from the individual income tax.

Dick Pryor: A tax cut would reduce state revenue collections. What is he thinking about the upcoming state budget and agency appropriations?

Shawn Ashley: Stitt made it clear in the fall, has reiterated in recent weeks and said again Wednesday, he wants to keep state agency budgets and overall spending flat while allowing for certain needed or targeted investments for additional spending. Agencies are now requesting close to $1 billion in new spending for fiscal year 2026. So, I expect there will be some funding fights this legislative session.

Dick Pryor: This is Governor Stitt’s next to last State of the State address. What else do you expect to hear from the governor in the speech?

Shawn Ashley: I spoke with Governor Stitt in late December. On one hand, he acknowledges he has less time left before him as governor than is already behind him. On the other hand, when I would suggest that someone consider him a lame duck, since he has just two years remaining in his term, he told me rather emphatically, I don't accept that. And later added, “This is the fourth quarter. I'm the most prepared I've ever been.” Governor Stitt will get his opportunity to start proving that Monday afternoon.

Dick Pryor: And we'll have live coverage of the State of the State address on KGOU, starting Monday at 12:30. Thanks, Shawn.

Shawn Ashley: You're very welcome.

Dick Pryor: For more information, go to quorumcall.online and you can find audio and transcripts at kgou.org. Until next time, with Shawn Ashley, I'm Dick Pryor.

Shawn Ashley: Capitol Insider sponsored by the Oklahoma State Medical Association. Physicians dedicated to providing and increasing access to health care for all Oklahomans. More on the vision and mission of OSMA at okmed.org.

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Dick Pryor