Butt for a tax

The con of the 56th Legislative Session

Smoke ‘em if you got ‘em. And if you don’t got ‘em, buy ‘em. Lots of ‘em. Seriously. 

The state’s depending on you. 

Then, if all of you, the old smokers and the new, could hold off dying miserable, painful, and—most germane here—uninsured deaths for a few years from tobacco-related diseases, that would be great.

As you know, the Oklahoma legislature, literally minutes before adjournment sine die (that’s Latin for, “Yay! We don’t have to cancel our summer vacations!”), passed Senate Bill 845—legislation that will add a tax of $1.50 to each pack of cigarettes sold in the state, which, according to those who crunch such numbers, will raise about $215 million per year. Considering that’s approximately 20 percent of the state budget hole, the largest revenue increase passed this session, we clearly need tobacco smokers to step up their game. 

There are approximately 650,000 smokers in the state (about one in six of us), so you could very easily get to that $215 million mark if they all buy a pack a day—and, as mentioned, don’t keel over anytime soon. The problem—well, one of the problems—is that nationally, these taxes don’t fully go to revenue reduction but also go to offset health-related smoking costs, which are staggering.

Of every $10 spent on healthcare in the U.S., almost 90 cents is due to smoking, a new analysis says.¹

But SB 845 doesn’t specifically address that.

That was one point of contention on the House floor Friday. State Rep. Collin Walke, D-Oklahoma City, was one of many members who argued the bill likely isn’t constitutional. He said that the law doesn’t dictate the money be spent on cessation programs, which a fee typically would, but it allows lawmakers to treat it as general revenue.² 

Smoking is an enormous burden to any state, so the industry and the smokers they’ve bamboozled and addicted should pay a disproportionate amount to state coffers. But neither caused Oklahoma’s deficit. Years of stupid tax cuts and giveaways did. Short-sighted legislators who kept talking about limited government did. Governors of both parties who kept selling the bankrupt notion that tax cuts were the way to a robust state economy did. 

Look, I’m all for taxing cigarettes more than the current $1.03 per pack—quadruple it for all I care—but before we do, or while we’re doing it, let’s also ask everyone in the state to make some concessions as well, and, say, return income tax rates to 2004 levels of 6.65 percent³ (where they were when the state could sustain itself), increase the gasoline tax (which is 8 cents lower than the national average⁴), and raise the  gross production—ours is presently 1–4 percent—to be more commensurate with North Dakota (11.5 percent) and Texas (7.5 percent).⁵ 

The state could have raised more than twice what will come in from the cigarette tax by increasing taxes on oil and gas producers,⁶ but Harold Hamm of Continental Resources, among others, thinks the state and its resources are his personal sandbox, and since he seemingly has most state legislators’ cojones in a jar of fracking fluid on his desk, that idea was defeated pretty easily. 

Plus, better to bother a two-pack-a-day roofer in Tishomingo for another three bucks a day than to upset Harold.⁷

Not only are people in poverty more likely to smoke, but they also devote a much larger share of their income to cigarette purchases. From 2010 to 2011, smokers earning less than $30,000 per year spent 14.2 percent of their household income on cigarettes, compared to 4.3 percent for smokers earning between $30,000 and $59,999 and 2 percent for smokers earning more than $60,000.⁸

And, for what it’s worth, according to Forbes, Hamm is worth about $10.5 billion.⁹

Let’s continue.

The immediate problem, potentially more serious, as we’ll see in a moment, is that SB 845, according to legislators, is not actually a tax, but a fee (oh, stop laughing) and we know this because authors of the bill renamed it the Smoking Cessation and Prevention Act of 2017, from the original legislation, HB 2365, when it was called the Oklahoma Revenue and Taxation Reform Act of 2017.

    How clever is that? They took the word taxation out of the legislation and replaced it with prevention (without changing its intent) to circumvent the state constitution’s prohibition against such things. They’re so cute when they’re being obfuscatory.

Which is kind of the point: 

Tobacco taxes can serve multiple functions, although in most cases, in both the United States and around the world, the overriding concern has been to provide a steady revenue stream, not to curb tobacco use.¹⁰

So why did they have to do an end-run around the constitution? Because SQ 640, passed in 1992, stipulates that the legislature could not pass any “revenue bills” that aren’t confirmed by votes of the people unless they are passed by three-quarter majorities in the House and Senate and signed by the governor, passed with emergency clauses, which puts them into effect as soon as the governor signs them (which the House version doesn’t do), and—this was the big one—passed in the final five days of the legislative session for fear it might be rushed into law without representatives fully digesting their meaning and being given time for debate.

The House budget committee was asked to vote on the bills within 46 minutes, by midnight, because of a legislative deadline.¹¹

Like Big Tobacco was going to miss that one.

The lawsuit, filed Wednesday by Phillip Morris USA Inc., R.J Reynolds Tobacco Co. and others, alleges the fee violates a state constitutional prohibition against passing revenue-raising measures in the final five days of a legislative session and without a supermajority of lawmakers.¹²

Oops. 

Oklahoma’s new $1.50 fee on a pack of cigarettes is an unconstitutional “tax,” cigarette companies and three Oklahoma residents say in a lawsuit asking the state Supreme Court to prevent it from taking effect.

The relentless, rapacious cigarette lobby on one side; cowed, dissembling state legislators on the other. It’s tough to know who not to root for.

If the lawsuit is successful and the state Supreme Court throws out SB 845 for being unconstitutional, that $215 million is off the table, meaning the whole shebang blows up and Governor Fallin has to call a special session, which nobody wants but pretty much everyone deserves, to fix the budget hole.

If I had to bet, I’d say the State Supreme Court defers to the legislature on this and allows SB 845 to slide through. If it does, Tulsa World Editorial Pages Editor Wayne Greene is right—and it makes me nervous when I agree with him—for concluding that if court allows this tax to become law, the state might as well stop pretending State Question 640 even exists.

If the Oklahoma Supreme Court allows measures approved in the final days of the 2017 Legislature to stand, SQ 640 is effectively dead ... thanks largely to Republicans.¹³

SQ 640, a legislative and budgetary straightjacket, dying an unceremonious death, would be the best thing to come out of this awful 56th Legislative Session.

For more from Barry, read of his adventures in Reykjavic.