House bill raising cigarette, fuel taxes moves forward
Oklahoma lawmakers on Monday advanced higher cigarette and motor fuel taxes, but politics could get in the way of the increases becoming law.
Republican leadership rolled out the two tax increases in a single bill. They’ll need at least a handful of Democrats for it to pass the House floor, but Democrats have vowed to block a cigarette tax increase until there’s an agreement to also raise the tax rate on oil and gas production.
The minority party has criticized the motor fuel tax as having a disproportionate effect on poor and middle-class families.
House Bill 2365 levies an additional tax of $1.50 per pack of cigarettes and 6 cents on each gallon of gasoline and diesel fuel. With $340 million in new tax revenue, lawmakers could fill more than a third of next year’s budget shortfall.
The bill would also eliminate every tax exemption and deduction given to oil and gas companies, House Appropriations and Budget Chair Leslie Osborn said.
Doing so would not have an immediate effect on the budget, but the state could eventually save $51 million each year.
In a committee meeting Monday, Democratic Minority Leader Scott Inman asked why the GOP introduced a bill that would tax gasoline purchases but wouldn’t increase oil and gas well production tax rates.
“We’re fiftieth in the nation for collections on gas and diesel,” replied Osborn, R-Mustang. “Those dollars are shot into transportation (spending), which I believe is something that benefits every socioeconomic class in the state.”
Osborn said that a gross production tax increase is still possible.
“If you think this is the last revenue measure I plan on bringing this session, you’d be sadly mistaken. So that could be included in the plethora,” she said.
House Bill 2365 was introduced last week but not heard until Monday. An earlier version of the bill included different funding levels for health agencies.
Instead of 45 percent in the original version, the state’s Medicaid agency would receive half of all new revenue. The previous 28-percent allocation to a new mental health fund was reduced to 23 percent.
After passing the Joint Committee on Appropriations and Budget, the bill can now be heard on the House and Senate floors.
Three other bills
Three other bills passed the committee on Monday. Senate Bill 836 increases Oklahoma Corporation Commission funding by $1.4 million with existing revenue.
House Bill 2367 repeals a discount given to online retailers who handle sales tax remittance. It would raise $14.1 million if it becomes law.
House Bill 2368 reverses a decision made last year to eliminate the earned income tax credit. The bill reinstates half of the credit available to taxpayers, which could cost the state $14.4 million.
House Bill 2369 would require that subsidiaries of Oklahoma businesses file all tax information with the state, including profits and losses, even if the subsidiary does business somewhere else. There could be positive revenue to the state by 2021.