As expected, tobacco ‘fee’ will be decided in courtroom

W ELL, that didn’t take long. Not two weeks after the Legislature adjourned, having passed a $6.8 billion budget balanced in part with a series of new fees, a legal challenge says the largest of those fees is really a tax that was approved improperly.

This is just what we and many others feared would happen when the budget was completed in the last week of May.

According to the state constitution as amended by voter approval of State Question 640 in 1992, “any revenue bill” must receive the support of 75 percent of the members in the House and the Senate, or be placed before voters for them to decide. The initiative petition placing SQ 640 on the ballot said the restriction applied to “any bill passed by the Legislature intended to raise revenue for support of state government.”

Facing a large shortfall, lawmakers wrestled during much of the session with the idea of increasing the cigarette tax by $1.50 per pack to benefit healthrelated agencies. As the clock ticked down and it became evident the votes weren’t there to pass the tax, legislators instead approved a “smoking cessation fee” of $1.50 per pack, contained in Senate Bill 845. Fees can be approved by a simple majority vote, and this one was.

As we wrote at the time, Oklahoma courts have generally held that the provisions in SQ 640 don’t apply to fees, but it’s also hard to argue this fee (and others) isn’t really a tax.

This is one of the arguments made by R.J. Reynolds Tobacco Co. and Phillip Morris USA, the nation’s two largest tobacco companies, in a lawsuit filed Thursday. They are joined in the lawsuit by two Oklahoma retailers, a wholesaler and three residents.

The fee is scheduled to take effect in August, and would be levied on wholesalers. But the lawsuit says the fee is in fact a tax, and that it’s unconstitutional because the measure originated in the Senate and because it was sent to the governor so late in the session.

The state constitution requires revenue bills to originate in the House, and says they cannot be enacted in the final five days of a session.

The lawsuit also notes that most of the revenues to be generated aren’t designated for smoking-related purposes. Instead, they are set to go primarily to the state’s mental health agency, the Department of Human Services and the agency that runs Oklahoma’s Medicaid program.

A successful challenge to SB 845 would create big problems — the tobacco fee is expected to generate more than $200 million (the official estimate is $257 million) and that amount was built into those agencies’ budgets.

“If a cigarette tax can be a ‘smoking cessation fee,’” the lawsuit argues, “nothing stops an alcohol tax from becoming an ‘inebriation cessation fee’ to stop drunk driving, or an excise tax on restaurant meals from masquerading as a ‘corpulence cessation fee’ to cover the rising state health-care costs of obesity-related diseases.”

The Oklahoma Supreme Court will have the final say in this debate, and predicting how it will rule would be folly. However, lawmakers who voted for this bill may wish they had appreciated the simple concept that words matter.