Okla. Supreme Court shoots down income tax cut

OKLAHOMA CITY (AP) -- A sweeping agreement among Republican leaders to slash the state's personal income tax rate and provide $120 million for repairs to the Capitol is unconstitutional because the bill passed by the Legislature contains more than one subject, the Oklahoma Supreme Court ruled Tuesday.

In a unanimous decision, the court said the legislation violated the Oklahoma Constitution's ban on logrolling, or including multiple subjects in one bill.

"Taxation policy and the appropriation of state funds for Capitol improvements are not germane, relative or cognate to a readily apparent common theme and purpose," Justice James Winchester wrote in the opinion. "A voter could certainly be for one measure and not the other but forced to approve the entire bill in order to pass the desired legislation.

"The single subject rule prohibits this unpalatable choice."

The bill, which represented a major political victory for Fallin, would have cut the state's top personal income tax rate from 5.25 percent to 5 percent, beginning in January 2015, with a second cut to 4.85 percent set for 2016 if state revenues rose to certain levels. It also would have diverted $120 million in income tax collections over two years to fund an overhaul of the nearly 100-year-old Capitol, including upgrades to the electrical and plumbing systems.

But the bill, which was passed earlier this year, was challenged by Jerry Fent, a retired Oklahoma City attorney with a long track record of successfully challenging legislative actions. Attorneys for the state had argued the measure was constitutional because it dealt entirely with managing taxes.

Fallin, Senate President Pro Tem Brian Bingman and House Speaker T.W. Shannon all issued statements Tuesday expressing disappointment with the court's ruling and vowing to address the issue in the 2014 session.

"Today's ruling was a huge blow to Oklahoma families who have been expecting tax relief, and I'm deeply disappointed the Supreme Court has once again ruled against the interests of those families," Shannon, R-Lawton, said in a statement. "I am prepared to act quickly with legislative leaders and the governor to restore what the Supreme Court has undone."

The savings on the average Oklahoma tax return would be about $82 if the rate dropped to 5 percent, according to the Oklahoma Tax Commission.

Although Republicans enjoy a 72-29 advantage in the House and a 32-16 edge in the Senate, it's not clear if both a tax cut and the Capitol renovation project could pass separately. Shannon and members of the increasingly conservative House GOP caucus have opposed the idea of a bond issue to pay for Capitol improvements, which prompted the need to divert $60 million in the current fiscal year and an additional $60 million next year to pay for the project.

Rep. Mike Reynolds, R-Oklahoma City, is among some Republicans who were critical of the proposal and warned it was unconstitutional.

"It would have been very easy to pass the tax-cut bill without the leadership's pet project of Capitol improvements," Reynolds said.

A spokesman for the Office of Management and Enterprise Services said the Capitol project will be suspended until further action from policymakers.

"No more funds will be transferred," said OMES spokesman John Estus. "The ruling didn't provide guidance on the $20 million already transferred, so we're still assessing how to proceed in that area."

Senate Democratic Leader Sean Burrage said he was not surprised by the court's ruling.

"It's simply the Supreme Court following the law," Burrage said. "The Republican legislative leaders were warned this was a problem when they ran the bill, but they chose politics over good policy in connecting these two issues."

Without the incentive of voting for a tax cut, Burrage, D-Claremore, said it will be difficult for some Republican members to support $120 million for Capitol improvements, especially because collections to the general fund have slowed since the Legislature adjourned in May.

The state's highest court has shot down numerous bills in recent years for violating the state's single-subject rule. A sweeping overhaul of the state's civil justice system was ruled unconstitutional by the court in June, prompting Fallin to call lawmakers back to the Capitol for a special session to pass the bills again separately.

After that ruling, Shannon called for changes in the way appellate judges are appointed and retained.

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Sean Murphy can be reached at www.twitter.com/apseanmurphy