Oklahoma's income tax is its only progressive tax. The bottom one-fifth of earners pay 0.4 percent of their income in state income tax and the top 5 percent pay 4 percent of their income. Oklahoma's income tax is progressive because the tax rate increases as income increases and because the standard deduction and personal exemption mean that taxes apply only to income above a threshold level.

Tax credits also make the income tax more progressive. Many of these credits reduce the tax paid by qualifying low- and middle-income taxpayers.

• The earned income tax credit (EITC) is available to many qualifying families with children who make up to $41,646 and to single earners without children making up to $12,880 (for the 2008 tax year). Oklahoma's EITC is 5 percent of the federal EITC and can be up to $241 for a married couple with two children in 2008. The EITC is refundable, meaning that taxpayers who owe little or no income tax can get the credit as a refund. Click here for the Center on Budget and Policy Priorities' report on state EITCs. Click here for OK Policy's issue brief on increasing the Oklahoma EITC.
• The sales tax credit, commonly known as the grocery tax credit, reimburses low-income taxpayers for part of the sales tax they pay on groceries. This credit is $40 per exemption (typically $40 per person in the household) for taxpayers with gross incomes up to $20,000 ($50,000 if over 65, disabled, or claiming a dependent in the household). Like the EITC, the sales tax credit is refundable to those who owe less in taxes than the amount of the credit.
• The child care and child tax credits are available to households with children and federal adjusted gross income of $100,000 or less. The credit is for 20 percent of the federal child care tax credit or 5 percent of the federal child tax credit (normally $50 per child), whichever is larger.

Oklahoma's property tax is somewhat regressive, but has two progressive features. First, all residential properties in which the owner lives qualify for a homestead exemption. This exemption reduces the assessed value of all properties by $1,000. For a $50,000 house, this amounts to an 18 percent tax reduction. For a $200,000 house, the reduction is much smaller, 4.5 percent.  Oklahoma also freezes growth in property taxes for senior homeowners with income below the median level of their county.  However, the property tax remains a larger burden for the lowest 20 percent of taxpayers. Lower income households generally rent and do not qualify for a homestead exemption.  They also spend a larger share of their income on housing costs. Oklahoma does not offer property tax relief to renters. (This model assumes that property owners pass property taxes on to their tenants.)

Oklahoma has made two important changes in recent years to make taxes more progressive. In 2004, the Legislature gradually increased the standard deduction from $1,000 (single) and $2,000 (married filing jointly) to the federal levels (presently $5,450 single and $10,900 joint) for 2010. The standard deduction raises the threshold amount at which one begins paying taxes; this provides the greatest benefit to low- and middle-income taxpayers since most high-income taxpayers itemize deductions rather than taking the standard deduction.

The second important recent advance in progressivity was the adoption by voters in 2005 of an increase in eligibility for the  senior property tax valuation freeze from $20,000 to the median income of the county.

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