Money can’t buy you love, but can it buy the state of Oklahoma an income tax cut?
State leaders are poised to mull that question for the next two months after the state Board of Equalization certified a Fiscal Year 2026 appropriation authority today that is roughly $72 million higher than December’s prior estimate but still significantly below last year’s figure, which allowed the Oklahoma Legislature to eliminate the state portion of the sales tax on groceries and make a bevy of one-time investments with about $1 billion of carryover cash.
Stronger income tax revenue projections and higher natural gas price predictions largely accounted for the FY 2026 revenue estimate bump between December’s meeting and Friday’s Valentine’s Day gathering.
“We have an extra three months of data between that meeting and this one, and they always increase our accuracy at that time,” said Marie Schuble, the director of tax policy with the Oklahoma Tax Commission.
After the meeting, Gov. Kevin Stitt invited media members into his office for a whiteboard review of the figures at hand, scribbling blue numbers like a besuited math teacher and dropping to one knee at times to scrawl out what he thinks should be the result of his equation: half-point cuts to Oklahoma’s 4.75 percent personal income tax rate and 4 percent corporate income tax rate.
For the half-point personal income tax rate cut proposal, the state budget would receive a roughly $240 million reduction for FY 2026 appropriations and a fully annualized $600 million impact for FY 2027 appropriations — plus additional impacts owing to apportionment requirements (sometimes called “off the top” amounts) for things like Department of Transportation highway projects, the Education Reform Revolving Fund and the Teachers’ Retirement System.
Stitt, however, has argued that cutting the personal income tax rate will inevitably spur other economic activity, including the attraction of additional taxpayers who might move to Oklahoma.
“It’s not like I’m cutting $240 million. I’m just leaving it in their pockets, right? So it gets spent at the grocery store, it gets spent at the gas station, it gets spent at the bicycle shop. It gets spent at the restaurants and the hotels,” Stitt said. “It spends in the economy and it comes back. We’re just saying it doesn’t come to the government first. That’s all we’re saying. We’re leaving it in Oklahomans’ pockets because I truly believe — it’s a philosophical difference — that people can spend their money better than the government can.”
If Stitt has a philosophical difference of opinion with state leaders, it didn’t appear to be with those flanking his conference table during Friday’s meeting. Lt. Gov. Matt Pinnell, State Treasurer Todd Russ, State Auditor & Inspector Cindy Byrd and Secretary of Agriculture Blayne Arthur each voted in favor of the revenue estimates presented by state agency staff, and Pinnell and Russ spoke positively about Oklahoma’s economy.
But although they hold constitutionally-prescribed seats on the Board of Equalization, neither Attorney General Gentner Drummond nor Superintendent of Public Instruction Ryan Walters graced the state with their presence Friday, despite their bold Twitter talk about Stitt earlier this week.
More than an hour before Friday’s meeting, Attorney General Gentner Drummond sent a sack of sour kisses to Stitt and legislative leaders in the form of a press release declaring that he — again — has “no confidence” in the Oklahoma Tax Commission’s estimates used to certify this session’s appropriation authority.
“I am disappointed but not surprised that the governor refused to increase legislative involvement in this process, which is far too important to the future of Oklahoma to be monopolized by a single politician,” Drummond said. “The budget certification process is in dire need of reform. The status quo allows the governor to manufacture budget numbers that support his policy agenda, rather than a consensus approach that would reflect legislative input.”
Drummond’s comment stood in contrast to the thoughts of Senate President Pro Tempore Lonnie Paxton (R-Tuttle), who told media Thursday that the preview he had seen of the fiscal figures left him feeling confident in the methodology.
“It looks like there are a lot of things that are external politics that play into this. They get estimates for what natural gas prices are going to be, what oil prices are going to be. Those are external to Oklahoma, so we bring in outside professionals to figure all that out. So I feel very confident,” Paxton said. “If you look at the history of [the Board of Equalization], they’re really pretty accurate. Outside of the year where COVID hit and kind of disrupted everything to where they needed to come back and re-certify again with kind of some new numbers (…) About every year, they’ve been pretty accurate.”
House Appropriations and Budget Committee Chairman Trey Caldwell, however, said individual components of the budget estimates certified Friday bear watching, including the $389.5 million estimate for annual interest and investment income largely derived from the state’s unprecedented cash carryovers in recent years.
“My general reaction is I still have some concerns when it comes to the interest earnings portion of it and also the projected price of (natural) gas going into the next fiscal year. I think that it is positive news,” Caldwell (R-Lawton) told NonDoc after the meeting. “We’re seeing an increase in income tax revenue, which, in my opinion, is an indicator of economic growth. More people have more money. That means, you know, a higher level of economic prosperity. I think it’s a pretty good leading indicator. So that is encouraging, but at the same point in time, we’re still relatively flat. So it’s just something where we’re going to have to continue to work through the process and see where we are when it comes to what kind of budget we actually put together in the Legislature, working in conjunction with the Senate.”
‘Fundamental, core functionalities of government’
For years, Stitt has repeatedly pushed the Legislature to cut Oklahoma’s personal income tax rate and corporate income tax rate. While lawmakers did cut the personal income tax rate 0.25 percent and the corporate income tax rate by 2 percent in 2021, his subsequent efforts have been rebuffed by one chamber or both, including during multiple special sessions he called for that purpose. Instead, lawmakers cut the sales tax on groceries last year, which Stitt celebrated, but Republican Senate leaders stood firm against voting on an income tax cut before the end of a tumultuous session.
Over the years, Stitt has tossed out a variety of numbers to argue that state savings are higher than they’ve ever been and that government growth should be checked by cutting revenue streams before they mature into recurring expenses. To do so, Stitt has held press conferences flanked by charts and graphs proclaiming numbers that have often irked legislative budget leaders for their lack of nuance.
After Friday’s meeting, Stitt again presented figures, this time on a whiteboard while cautioning that the income tax rates of Arkansas and Colorado are below Oklahoma’s — although overall tax burdens can be separate stories.
“The Legislature, they’ve got to choose to write the budget, and the governor either gets to sign it or not sign it or veto it,” Stitt said.
Asked about legislative leaders’ concerns that cutting the personal and corporate income tax rates might be the fastest way to return Oklahoma to the days of budget deficits and revenue failures, Stitt acknowledged the past.
“Sure, you can make that argument,” Stitt said, pivoting back to the idea that tax cuts spur economic growth. “Obviously you need taxpayers to pay taxes, and taxpayers are moving to states that are more business friendly.”
Caldwell suggested that legislative budget leaders are less than thrilled to hear Stitt talk about a half-point income tax cut costing only $240 million, since its fully annualized impact is about $600 million two years down the line.
“I think anytime we look at doing tax cuts or spending or any kind of massive change when it comes to year to year revenue or year-to-year expenses in the state of Oklahoma, we should fully account for its entirety of its impact in a full fiscal year when we when we make those assessments,” Caldwell said. “So I don’t agree with only accounting for roughly 40 percent of the next net cost to the budget.”
Caldwell added that the 2025 regular session is about much more than tax cut talk.
“There are still fundamental, core functionalities of government that the state Legislature has to address in the coming year, whether that is ensuring that young people are going to have access to high-quality surgical care — talking about infants at [OU Medical Center] — whether that is the revitalization of a once top-5 percent or top-1 percent vet school and getting it back on track to be a preeminent institution in the world, and getting it back on track with OSU vet, and then also looking at whether it’s deferred maintenance or all the other different things that the state has on our plate right now, not to mention the consent decree that the governor and the attorney general have agreed to enter in. (…) Not just the legal cost, but what are we as a state going to have to change to prove to the courts that we are fixing the problem that has been identified in the consent decree? And that’s going to be additional funding for mental health, but also having bed availability, restoring competency and making sure that these [pre-trial detainees] are getting a fair and speedy trial, and getting them through the system, and making sure that they’re getting through the adjudication process.”
Senate Appropriations and Budget Committee Chairman Chuck Hall (R-Perry) issued a statement Friday afternoon somewhat echoing his House counterpart.
“In the year following the largest tax cut in state history, this dip in revenue doesn’t come as a surprise, but it reminds us to be careful and deliberate while reviewing proposals for further revenue cuts,” Hall said. “We currently have around $1.2 billion in new funding requests from executive branch agencies to consider and nearly $500 million in new capital project requests. This Legislature has a track record of passing sound fiscal policies that have set Oklahoma up for success, breaking a cycle of crippling budget shortfalls like we saw in past years. While the state faces some financial challenges in the upcoming year, I see this as a chance for Oklahoma to eliminate wasteful spending and focus on making government more efficient. I’m confident the Senate, working alongside the House and the governor, will pass a responsible, balanced budget this year that keeps our state government funded, as the constitution requires.”
While Stitt has strongly championed “flat” agency budgets for FY 2026, he did acknowledge that inflation can impact government agencies and their employees.
“I think it’s very reasonable,” he said of concerns that a flat budget equates to a cut owing to the rising prices of goods and services. “If you’re telling me that CPI index is 2.5 percent or 3 percent, let’s give every agency a 3 percent raise. That’s fine. I think you can modestly do that.”
