A court challenge for taxes labeled as fees?

When is a tax not a tax?

On May 24, the Oklahoma Senate passed Senate Bill 845, which adds a $1.50 tax per pack of cigarettes, by a vote of 28-18. On May 26, the House approved the bill by a 51-43 vote and it was signed by Gov. Mary Fallin.

“I’m pleased that legislators approved a fee on cigarettes. Smoking is Oklahoma’s leading cause of preventable death. Lawmakers approving an additional $1.50 per pack is the most important thing they could do to improve Oklahoma’s health ranking,” Fallin said.

But Section 33 of the Oklahoma Constitution mandates that spending bills originate in the House of Representatives, not in the Senate. And it prohibits any revenue bills from being passed in the last five days of the annual legislative session. Finally, all revenue bills (tax increases) require a three-fourths’ vote (75 percent) in the House and Senate for passage.

“The cigarette tax failed as a House bill, so to get around these three requirements, the Senate ran the same idea as a ‘fee,” wrote John Michener, president of OKPAC, a conservative group in Oklahoma City. “House and Senate leadership, along with just enough lackeys to pull off the coup, made up their minds to punish the people for the legislature’s history of fiscal irresponsibility and mismanagement.”

There are already predictions that legal challenges will be filed because this looks like a tax increase that failed to get a supermajority of votes for passage.

“Four months ago, as the Legislature was about to begin its 2017 session, the governor addressed the House and Senate and the whole state,” Michener wrote. “She asked for tax increases to balance the budget, specifically calling for a sin tax on cigarettes.  From start to finish of the session, House and Senate leadership never waivered or departed from those marching orders.  To get the job done, they had to use every trick in the book, and make up some new ones.

“Grassroots opposition could not stop them.  Conservative legislators could not stop them.  The law itself could not stop them.  Along the way, we heard a lot of talk about ‘making tough decisions.’  What they meant was that they were going to make it tough on us, not on themselves.  They clearly feared the special interests more than they feared the electorate.  They decided they would rather burden the average Oklahoma family by taking more of their income than cut state spending, which might anger powerful agencies or departments.”

There is a difference between a “tax” and a “fee.”

“The difference between a tax and a fee has not been adequately defined by any state statute or court opinion, but the common sense understanding is that a tax is any revenue coming into the state that can be allocated to pay for anything,” Michener wrote. “A fee, on the other hand, is revenue that comes into the state in connection with a user paying to access a particular state-provided good or service.  The fee is allocated directly to the support and production of the good or service.

“For example, you might pay a road toll.  That is a fee to use the road, and the fee goes to the maintenance of the road.  Another example is the fee to use a state park.  The fee pays for mowing the sandburs and replacing the toilet paper (sometimes) in the latrines.  These are fees, because in exchange for payment, you get access to a specific good or service, and the money actually pays for the good or service.

“A cigarette tax is not a fee.  It is a normal sales tax on a specific product.  Now, if the state wants to produce and provide Okie Smokies, then they could ‘legitimately’ charge a fee for access to that product.

A wolf in sheep’s clothing describes more than the tax in fee’s clothing; it describes the Republicans who voted for it.   Every legislator who voted for this sham should be ashamed of himself.  Unfortunately, our culture is far beyond feeling shame about anything, anymore.  Whether they feel bad about their dishonesty or not, we will have to vote them out in 2018.”

Tulsa representatives who voted against the bill include Tom Gann, Janine Nollan, Eric Proctor, Mike Ritze and Chuck Strohm. Tulsa senators who voted no included Nathan Dahm, Dan Newberry and J.J. Dossett.

Also, Fallin’s budget modifies the incentives on the gross production tax from 1 percent to 4 percent  on current producing wells that were drilled between July 1, 2011, and July 1, 2105. She expects that to add $92 million in new taxation in 2018. About $140 million from the oil and gas industry will go toward easing the deficit.