Senate President Pro Tem Lonnie Paxton is “100 percent on board” with Oklahoma Governor Kevin Stitt’s proposed half-percent income tax cut – but it’s a cautious 100 percent. 

Paxton told The Frontier that recent Board of Equalization figures, which show Oklahoma’s budget to be short of expectations following last year’s grocery tax cut, make him wary of the possibility of a return to the state’s budget woes of last decade. 

“I can easily say I’m 100% in favor of an income tax cut,” Paxton told The Frontier.

But he also remembers when the state was facing a more than $1 billion budget deficit in 2016.   Stitt has pushed for “half and a path,” his term for a half-percent cut  and a path toward eventually eliminating personal income taxes. Recent Board of Equalization figures show Oklahoma’s revenue projections are less than anticipated, though the state has about $4.6 billion in reserves. Those figures come after the state eliminated its portion of the grocery tax last year, which resulted in a loss of more than $400 million in tax revenue. Stitt, while urging a cut to personal income taxes, has also called for state agencies to have flat budgets for this fiscal year.

“If we still had the $450 million, give-or-take, in grocery sales tax … we wouldn’t really be underwater,” Paxton said. “We’d be a little bit over.”

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Stitt has claimed Oklahoma can afford the half-percent personal income tax cut – which would result in a loss of about $600 million each year from the state budget – because of savings accounts that have ballooned during his time in office. But Paxton, like his predecessor, Senate President Pro Tem Greg Treat, is reluctant to use savings to fund tax cuts. Other budget issues are hanging over the Legislature’s head, Paxton said. Voters approved a measure to add Medicaid expansion to the Oklahoma Constitution in 2020, and payments are currently split 90-10 with the federal government. Paxton said those figures might change to a 60-40 split because of possible cuts from Congress, which would result in a loss of “another $600-$700 million” from the state’s budget.

“So we’d have to come up with that money too because Medicaid expansion was put in the Constitution, and the Legislature has no choice but to go in there and pay for that,” Paxton said, noting those figures could eat through $4 billion in savings pretty rapidly. 

Stitt has pushed for the income tax cut, saying that “in times of excess revenue, Oklahomans should keep more of their hard-earned money.” But there’s also a business aspect to Stitt’s plan. Oklahoma has tried and failed in recent years to lure larger businesses to Oklahoma. During his State Of The State address in February, Stitt warned against Oklahoma being “left behind” while businesses flock to nearby states with lower income tax rates. 

“By being the best state for business, we’re paving the way to be the best state for education, the best state for infrastructure and the best state for families,” Stitt said. “Rising tides lift all boats.”

But Paxton believes an income tax cut only partially solves the state’s business recruitment efforts. Companies look at far more than just tax rates, Paxton said. Property taxes play a role, as do infrastructure and schooling options. And finding employees would be an issue for any new company relocating to Oklahoma.

“So income taxes are an issue,” Paxton said. “But it is one of many, many, many issues.”