Thursday, August 10, 2017

Oklahoma Supreme Court strikes down cigarette tax

In a swift and unanimous decision, the Oklahoma Supreme Court ruled that the Cigarette Tax Smoking Cessation Fee passed by the state legislature and signed by Governor Fallin violated the Oklahoma Constitution.

Here's the summary from the opinion (which can be read in full at this link):
Petitioners, who are manufacturers, wholesalers, and consumers of cigarettes, challenged Senate Bill 845, alleging that it is a revenue bill enacted outside of the procedure mandated in Article V, Section 33 of the Oklahoma Constitution. The parties agree that the passage of SB 845 did not comply with Article V, Section 33; so the case turns on whether SB 845 is the kind of "revenue bill" that Article V, Section 33 governs. Applying the test we have utilized since 1908, we conclude that the primary purpose of Sections 2, 7, 8, and 9 of SB 845 is to raise new revenue for the support of state government through the assessment of a new $1.50 excise tax on cigarettes and that, in doing so, SB 845 levies a tax in the strict sense. As such, Sections 2, 7, 8, and 9 of SB 845 comprise a revenue bill enacted in violation of Article V, Section 33 and are unconstitutional.
The scathing opinion was written by Justice Patrick Wyrick, the newest addition to the Oklahoma Supreme Court, and came less than 48 hours after the Court heard oral arguments on the case.

Some nuggets from the opinion:
[ś22] As a threshold matter, Petitioners present compelling contextual evidence in support of their claim that the Legislature's primary purpose in enacting SB 845 was to raise new revenues. The State Respondents urge us to ignore that evidence, and understandably so; it strongly indicates SB 845's passage was motivated by the Legislature's need to raise revenue so that it could satisfy its constitutional obligation to enact a balanced budget. We agree that a measure's purpose must be measured by its actual operation and effect, rather than by any legislator's statements as to what motivated his or her vote for the measure. But this dispute over the relevance of contextual evidence is ultimately of no consequence because SB 845's text-and text alone-conclusively demonstrates that the primary operation and effect of the measure is to raise new revenue to support state government.
[ś42] The position taken by the State Respondents is, in this regard, extraordinary. In their view even a measure that explicitly levies a massive new tax, can evade Article V, Section 33's "revenue bill" requirements so long as the tax is enacted for a "regulatory" purpose. In this respect, the State Respondents are willing to go even further than the House of Representatives because, under their view, even a measure which explicitly levies a new excise tax on cigarettes - like the four failed House measures - could have been enacted with a bare majority vote. This is so, insist the State Respondents, because the purpose of the new $1.50 assessment has always been to discourage smoking. The logical end point of this position is that the Legislature can impose by bare majority any tax whose purpose is to discourage behavior disfavored by the government. One can imagine the gasoline tax being doubled "to reduce traffic congestion and wear and tear on our roads, the costs of which are overburdening the Department of Transportation," or the income tax on the top 1% being tripled "to reduce the societal ills that arise from income disparities among our citizens." Surely the people did not intend that the Legislature could blatantly tax them without complying with Article V, Section 33, by merely wordsmithing their bills to describe some "regulatory" purpose for the tax. Thus, we reiterate that whether a measure is "intended to raise revenue" must be the overarching consideration in determining whether a measure is a "revenue bill." If so, the Legislature must either muster enough votes to satisfy Article V, Section 33, or submit the measure to the people for their approval.

[ś49] Lastly, were we to hold otherwise, the distinction between fees and taxes-and thus the protections against taxation provided by Article V, Section 33-would be meaningless. The State Respondents tell us that this is a common refrain from those raising such challenges, and one we should thus ignore. But despite any prior false alarms, this cry of "wolf!" rings true. If this quintessential excise tax can be transformed into a fee merely by calling it a fee and adding some regulatory gloss to the measure enacting it, then the promise of Article V, Section 33-a promise made to citizens in 1992 when they went to the polls and enacted the amended version-will be an empty one. The "tax relief" to be expected from the requirement that all "future bills 'intended to raise revenue' . . . be approved by either a vote of the people or a three-fourths majority in both houses of the Legislature" will have been illusory. And that, we think, would be an abject failure to carry out "the manifest purpose of the framers and the people who adopted it." 

Read the full opinion here.

This end result was very clear to anyone who was not dead-set on raising taxes on Oklahomans this past legislative session. The constitutional provisions regarding raising taxes are not rocket science, they're crystal clear, and it is beyond the pale that the Legislature (with some exceptions) and Governor sought to so blatantly violate the Constitution and the will of the people of Oklahoma.

If this measure was not struck down, the Legislature would have been given unlimited ability and power to raise taxes. The Supreme Court made the absolute right decision.


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