OPINION
Oklahoma is generally perceived as a lower-tax state, but unfortunately our tax on work and investment—the personal income tax—remains among the highest in the region and (increasingly) across the country.
That’s a problem because the income tax has outsized, negative impact on investment and job creation.
Oklahoma’s personal income tax has been cut from 7 percent in the 1990s to 4.75 percent today, but other states’ leaders are not twiddling their thumbs.
Mississippi officials recently put their income tax on the path to full repeal – and that state’s top rate of 4.4 percent is already lower than Oklahoma’s top rate.
Mississippi made the move to end its income tax, in part, because it is surrounded by states with no income tax – Texas to its west, Florida to its east, and Tennessee to its north.
A 2022 Kentucky law set revenue-based triggers that gradually lower that state’s income tax to zero. Officials in that state have now cut their rate to 3.5 percent in 2026 and will continue to cut a halfpoint as revenue growth occurs.
Meanwhile, Oklahoma’s 4.75 percent income tax is among the highest in our region.
Texas has no personal income tax. Arkansas’s rate is 3.9 percent. Colorado’s rate is 4.4 percent. Missouri’s top rate is lower than Oklahoma’s as well.
Only Kansas and New Mexico have higher rates, and Kansas officials have now voted to gradually cut their tax to 4 percent. That leaves Oklahoma and New Mexico at the bottom of the region.
Other states continue to beat us in the income-tax competition.
South Carolina’s rate has been cut to 3 percent. Iowa’s rate is 3.8 percent. Nebraska is on the path to a 3.99-percent rate. Arizona’s rate is 2.5 percent, and officials are considering total elimination.
Other states, like Wyoming, Alaska, New Hampshire, Nevada, South Dakota and Washington have no personal income tax.
Fortunately, Oklahoma lawmakers are taking this challenge seriously. House Bill 1539 would cut Oklahoma’s 4.75-percent personal income-tax rate by a quarter point each time net state revenue increases by at least $300 million, continuing until the tax is completely repealed. The Oklahoma plan does not involve offsetting tax increases but would instead simply lower the income-tax rate as tax collections grow – which they do more years than not.
It is a sensible plan that will make Oklahoma more attractive for work and investment. Those who advocate against income-tax repeal may be willing to condemn our citizens to substandard wage growth and job opportunity, but the rest of us cannot be so complacent. Thankfully, thus far Oklahoma lawmakers are embracing HB 1539 to help Oklahoma be competitive.
Jonathan Small serves as president of the Oklahoma Council of Public Affairs (www.ocpathink.org).
