Oklahoma does have a state income tax. The state uses a graduated income tax system so that the poor pay less tax and the rich pay more tax. The state also has a 4% corporate income tax rate, though businesses also pay sales tax, which is different from state income tax.
Oklahoma is one of the states where the top income tax rate is below 5%.
Income tax in Oklahoma isn’t fixed. It can (and often does) change every year to reflect the economic policy of the state.
Currently, there are six income tax rate brackets in the state. These are 0.25%, 0.74%, 1.75%, 2.75%, 3.75%, and 4.75%. The tax liability of an individual varies depending on their income range and filing status.
There has been some criticism of Oklahoma’s individual income tax as an issue that might make businesses reconsider their decision to invest in the state. For example, the neighboring state of Texas doesn’t have any individual state income tax and is often cited as a more business-friendly environment.
As such, businesses considering investment in Oklahoma might find themselves rethinking policies because of the individual income tax.
However, the state is not fully prepared to give up the revenues that individual income tax generates. There have been calls for reform, like getting a top tax tier similar to neighboring Colorado’s 4.4%.
Additionally, there have been house bills and suggestions favoring a single tax bracket with a flat income tax rate. There is, of course, significant criticism to such a decision. Essentially, a flat tax rate puts a higher burden on the poor, as compared to the rich.
It’s worth noting that with an income tax less than the national average of 5%, Oklahoma is one of the states with lower income tax. However, the state has a significantly higher sales tax than most other states.
Moving by way of a higher sales tax puts greater burden on the poorer section of the society, which has to pay the same tax as the rich.
As such, there is a need for tax reform in Oklahoma – a statement most of the state and its representatives agree to. However, a more thoughtful approach that puts fewer tax liabilities on the poor, while having the rich pay their fair share would be desirable.