The Oklahoma Supreme Court will hear arguments in a lawsuit challenging a last-minute cigarette tax hike enacted in May.
On May 26, the final day of the state’s 2017 session, both houses of the legislature approved a $1.50-per-pack increase in the state’s cigarette tax, from $1.02 to $2.52 per pack—a 147 percent jump—to help pay down a looming $878 million budget gap. Oklahoma’s constitution prohibits lawmakers from considering or passing revenue bills in the final week of the legislative session, which concluded May 26.
The lawsuit is scheduled to begin on August 8.
No Lack of Tobacco Money
State revenue collected from smokers has been increasing, but lawmakers are misspending that revenue, says Trent England, executive vice-president of the Oklahoma Council of Public Affairs.
“In Oklahoma, the tobacco lawsuit settlement money goes into a constitutionally protected endowment called the Tobacco Settlement Endowment Trust (TSET),” England said. “We’ve seen this movie before. When TSET was set up, it was going to be all about smoking cessation and smoking-related health care. They do some really valuable things in that area. The endowment has grown to over $1 billion. It gets between 50 and 60 million dollars in additional funds every year, plus the earnings off the endowment.
“They’ve decided they need to branch out into telling people not to drink fruit juice, because it has too much sugar in it, and advertising on billboards and in sporting events across the state, in all these things that don’t have anything to do with smoking and arguably don’t make anybody healthier,” England said. “They just enrich a bunch of advertising companies. Now we’re going to double down on that and add even more funding. It just doesn’t make a lot of sense.”
Public Health or Public Trough?
Kevin Callison, an assistant professor of economics at Grand Valley State University, says cigarette tax revenue is rarely used for its stated purposes.
“A Pigouvian tax, where the tax is equal to the negative externality imposed by smokers, would be the ideal,” Callison said. “However, it’s clear that many states prioritize revenue over cessation or public health when imposing cigarette taxes.
“For example, Louisiana recently increased their cigarette tax rate by $0.22, to $1.08 per pack,” Callison said. “Based on the most recent research, a $0.22 per pack tax increase is unlikely to result in significant numbers of people quitting, but it will very likely result in large revenues for the state.”