Senate advances income tax bill with aim to gradually eliminate tax

A bill that would set the stage for gradually phasing out Oklahoma’s personal income tax cleared the Senate on Tuesday with a 36-9 vote and now returns to the House for final approval.

Revenue Growth Triggers Required for Rate Reductions

House Bill 1539, as amended on the Senate floor, establishes annual revenue growth triggers that would reduce the personal income tax rate by 0.10 percentage points each year qualifying conditions are met. Specifically, the measure requires cumulative revenue growth of at least $425 million, a figure that must be certified by the State Board of Equalization at its December meeting. If the trigger is met, the rate reduction would take effect the following tax year.

Changes to the Original Proposal

The floor substitute raised the required revenue growth from $300 million to $425 million, and decreased the yearly reduction increment from 0.25% to 0.10%. Earlier fiscal analyses had evaluated the impact of a 0.25% rate reduction beginning in the 2026 tax year, but the substitute language shifts both the size and timing of any tax cut.

Supporters Say It’s a Gradual, Responsible Approach

Senate Republicans defended the bill as a measured and conservative way to reduce the income tax over time, without putting essential government services at risk.

"This is a sound measure that gradually over a long period of time will slowly reduce our income tax rate," said Senate Majority Floor Leader Julie Daniels, R-Bartlesville. "I am very confident that this is a sound way to slowly reduce the income tax with many guardrails in place that we did not have with previous methods."

Daniels added the gradual nature of the bill is designed to ensure stability:

"Of course we're concerned about core services. That's why this is so gradual."

Senate Pro Tem Lonnie Paxton, R-Tuttle, emphasized the bill's dependence on economic growth:

"It’s not just a tax cut — it’s a tax cut based on growth."

Critics Say Tax Cuts Favor the Wealthy

Democrats opposed the measure, warning that it would disproportionately benefit wealthier Oklahomans while doing little for low-income residents who pay more of their income in sales taxes than in income tax.

"Income tax cuts benefit the wealthy," said Senate Minority Leader Julia Kirt, D-Oklahoma City. "Our low-income folks pay a much higher percentage of their paycheck in sales tax. They do not pay high income tax, so the people that will benefit from this is our higher income bracket."

Kirt also questioned the lack of statutory definitions and safeguards in the bill’s language:

"We're talking about almost $300 million tax cut based on questionable language that doesn't use statutory language related to reports or numbers."

Next Steps

The bill now returns to the House, where lawmakers must approve the Senate changes. If passed, it will head to the governor’s desk for signature.

If enacted, the earliest the Board of Equalization could trigger a rate cut would be December 2025, with a tax reduction taking effect in the 2026 calendar year.