2023 special session tax cuts
Oklahoma Gov. Kevin Stitt proposes tax cuts during a press conference Friday, April 14, 2023. (Tres Savage)

(Editor’s note: The following preview of the Oklahoma Legislature’s second special session of 2023 opens the Oct. 2 edition of NonDoc’s Monday Minute newsletter.)

For the last two years, Gov. Kevin Stitt has made no bones about it: Amid record revenue collection and a flood of federal funds, he wants the Oklahoma Legislature to make major cuts to state taxes.

During this year’s regular session, however, legislative leaders opted for a massive education appropriation and the creation of refundable income tax credits for homeschool and private school families. They also dedicated significant one-time money┬áto a new fund for self-financing capital projects, and they set aside even more money in an effort to land a Panasonic battery plant.

Sure, the Legislature passed a pair of minor tax tweaks amounting to reductions, but that wasn’t enough for Stitt, who has championed eliminating the state sales tax on groceries and dramatically decreasing to the state’s income tax, which is responsible for roughly $4 billion in state revenue.

Last year, when Stitt called legislators into special session to stump for tax cuts, the House (again) advanced a series of bills to reduce tax rates. The Senate (again) did not hear the measures, instead saying a special committee would examine tax system overhaul options. Despite promising some sort of discussion, the Senate never revealed its findings.

Fast forward 16 months, Stitt has called a similar special session that some Capitol insiders expect to unfold much like last year, although the governor’s specific request is a bit different now.

For starters, Stitt has proposed five policy changes to increase “transparency” with how the Legislature handles the state budget. Cited directly from Stitt’s executive order, the proposals open with a reform that would prohibit the Legislature’s detestable habit of revealing hundreds of pages of budget-agreement bills at midnight and voting on them a few hours after sunrise.

Stitt proposes:

  • A requirement that no general appropriations bill or spending limits bill shall be acted upon by the Legislature, or any committee thereof, without first being made publicly available for consideration in its final form for at least three legislative days;
  • Statutory definitions for recurring revenue, non-recurring revenue, recurring expense and non-recurring expense;
  • The designation of expenditure type and revenue source as recurring or non-recurring in any proposed legislation that involves the expenditure of any revenue, regardless of source;
  • Requiring any legislatively directed spending be explicitly included in any general appropriations bill or spending limits bill; and
  • Prohibiting any member or employee of the Legislature from directly or indirectly attempting to influence agency expenditures outside of the legislative process.

In his special session call, Stitt also requested that the Legislature reduce the state’s personal income tax rate and place it on a pathway to elimination. Similarly, he requested the creation of “a statutory trigger which automatically eliminates any tax assessed by the state or its political subdivisions if that same tax is found by a state or federal court to be inapplicable to any individual by virtue of their race, heritage, or political classification.”

Stitt’s proposed “trigger” scenario refers to the Stroble v. Oklahoma Tax Commission case pending before the state Supreme Court. Appellant Alicia Stroble, a Muscogee (Creek) Nation citizen, argues that federal law and state code clearly exempt her from state income tax assessed against her pay from entities controlled by her tribe on its reservation.

With the plain language of Oklahoma’s administrative code giving Stroble a strong chance to prevail, Stitt’s special session call implored the Legislature to pursue “tax fairness” by eliminating the state’s income tax for everyone if the Supreme Court affirms that Oklahoma lacks authority to tax the income of tribal citizens who live on their reservations and work for tribally controlled sources. Bolstering concerns about “fairness,” members of two dozen other Native American tribes headquartered in Oklahoma would not enjoy the same exemption as the citizens of eight tribes that have seen their reservations affirmed over the past three years.

House Speaker Charles McCall (R-Atoka) said at a media availability that

“The particular trigger bill that the governor seems to reference in his call is a piece of legislation that has already passed the House in the previous session,” McCall said. “The state is in a very, very good position. I believe we can easily afford a cut to the personal income tax rate in the state of Oklahoma.”

‘We are still talking about his attendance’

As they did in 2022, Senate leaders have expressed serious concern about reducing Oklahoma income tax rates, citing the inevitability of an economic slowdown and the challenge posed by a three-fourths super majority requirement if any future Legislature tries increasing taxes to address a shortfall.

Pointing to these policy conundrums, Senate President Pro Tempore Greg Treat (R-OKC) and his caucus leaders have decided to start this week’s special session with a 10 a.m. Tuesday meeting of the Senate Appropriations and Budget Committee, which is expected to feature testimony about fiscal pictures and revenue forecasts from Senate staff, State Treasurer Todd Russ and Office of Management and Enterprise Services director John Suter.

Treat has also invited Stitt to testify at Tuesday’s meeting, imploring him to explain his vision for eliminating or replacing up to $4 billion in revenue derived from state income tax.

“We’re not opposed to tax cuts or tax reform. What we would be opposed to is doing it without a plan, without a long-term strategy on sustainability to make sure that we pay for critical services like public safety, health (and) education,” Treat said at a media availability last week. “I look forward to seeing the governor present a budget that reflects a $4 billion cut, because his previous five (proposed) budgets have been the largest in state history.”

All in all, the drama begs a $4 billion question: Will Stitt sit in a public hearing and answer senators’ questions about his ideas for state fiscal policy? Despite the governor regularly promoting himself as open and transparent, Stitt has yet to accept Treat’s invitation.

“We are still talking about his attendance,” Abegail Cave, Stitt’s director of communications, said in a statement Friday. “From what we can find, it’s a completely unprecedented request on the part of the Legislature to request the governor to come appear like this.”

With the Stroble case looming and Stitt interrupting hundreds of people’s October for a Capitol conversation, his potential absence from Tuesday’s tax policy talk could land awkwardly with legislators and delegitimize the special session he called.