Budget & Tax
Curtis Shelton | December 20, 2022
As other states cut taxes, it’s time for Oklahoma to act
The Tax Foundation recently released its 2023 State Business Tax Climate Index, a popular diagnostic tool which “enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare.” (OCPA research fellows Scott Moody and Wendy Warcholik, formerly of the Tax Foundation, were the co-creators of this popular index.)
Oklahoma ranks 23rd in this year’s edition. Though Oklahoma moved up three spots from 2022, we still lag other states in the region such as Texas, Tennessee, and Missouri, which all rank in the top 15.
The major change was in the corporate tax category where Oklahoma moved from 10th to 4th after cutting the corporate income tax rate from 6 to 4 percent and being the first state to make full expensing permanent. While Oklahoma also cut its income tax from 5 to 4.75 percent, the state actually dropped from 30th to 31st in the individual income tax category after so many other states made significant reforms to their own individual income tax structures.
Ten states have enacted some form of individual income tax rate reduction since 2021, and a couple of these states already had lower income tax rates than Oklahoma. Colorado passed Initiative 31, lowering the income tax rate from 4.55 to 4.40. Indiana plans to cut its rate from 3.23 to 2.9 by 2029.
Oklahoma risks being left behind. People continue to vote with their feet by moving to low-tax states, and while Oklahoma may be considered a low-tax state nationally, Texas and Tennessee dominate the region in terms of net migration between states.
State revenues continue to grow month after month and Oklahoma is poised to have a sizable surplus during the next budget cycle. While fears of a recession may make some lawmakers hesitant to cut taxes, the people of Oklahoma can’t take a back seat to the government they support.
Policy Research Fellow
Curtis Shelton currently serves as a policy research fellow for OCPA with a focus on fiscal policy. Curtis graduated Oklahoma State University in 2016 with a Bachelors of Arts in Finance. Previously, he served as a summer intern at OCPA and spent time as a staff accountant for Sutherland Global Services.