Oregon Voters May Put Cigarette Tax Hike into Constitution Permanently

Published December 1, 2007

Taxpayers in Oregon are faced with an unprecedented measure on the November 6 ballot. Measure 50 would permanently place a tobacco tax increase into the state constitution.

The measure is the result of a drawn-out tax fight in this year’s state legislative session. Gov. Ted Kulongoski (D) had proposed his “Healthy Kids” plan to cover children without health insurance. To pay for it, he called for raising the state tobacco tax to match the rate in neighboring Washington.

With the cigarette tax rate in Washington at $2.025 a pack, Kulongoski’s plan called for an 84.5 cents per pack–or 72 percent–increase in Oregon’s tax on cigarettes.

“Come hell or high water, the tax and spenders were intent on raising this tax,” said Grover Norquist, president of Americans for Tax Reform. “They shied away from nothing, not from short-circuiting the supermajority requirement, and not even from sticking a tax increase into the state constitution.”

‘Poor Policy’

Norquist added, “This is poor policy that sets a bad precedent. This tax increase is unnecessary, unfair, and unwise, but beyond that, the state constitution is not the place to sort out this issue. What are they going to stick in there next? A candy tax? A drive-through meals tax?”

State Rep. Linda Flores (R-Clackamas) agreed.

“Our state constitution should not be cluttered with ‘Sticky Notes’ like the refrigerator door. Taxpayers deserve better than that,” Flores said.

Failure in Legislature

When it became apparent the House was not going to pass a cigarette tax increase, and that a ballot referral might not garner the required supermajority of the votes, the state Senate drafted a measure that would refer the 84.5 cents per pack cigarette tax increase to a vote of the people in the form of a constitutional amendment. The measure also hikes taxes on cigars and other tobacco products.

Senate Majority Leader Kate Brown (D-Portland) had explained the majority’s strategy in the Oregonian newspaper on May 30: “We hope they will get (a three-fifths majority), but if they don’t, we need to be ready for another option.”

By the end of June, both chambers, with simple majorities, had voted to refer the tax hike measure as a constitutional amendment.

Constitutional Questions

The constitutional question led state Sen. Jeff Kruse (R-Roseburg) and a group of tobacco users and retailers to bring a lawsuit to prevent the measure from going to the ballot. They argued Measure 50 not only dodged the supermajority requirement to raise taxes but would make three unrelated changes to the constitution with separate taxes on cigarettes, cigars, and other tobacco products.

A state court rejected the claims in September, but the constitutional issue remains.

Jason Williams, executive director of the Taxpayer Association of Oregon, pointed out, “Even our liberal former governor sees how ill-conceived and messy this measure is, and this has caused him to give the weakest endorsement I have ever seen.”

‘Not Appropriate Place’

Williams was referring to former Gov. John Kitzhaber’s (D) statement on his blog at http://www.wecandobetter.org that while he intends to vote for Measure 50, he does “not believe that the Oregon constitution is the appropriate place to put a tobacco tax increase. This should have been a statutory measure.”

The measure does not add up for Kruse, who told a local TV station in his district, “This is a $200 million tax on 20 percent of the population, 60 [percent] of which make less than $20,000 a year, and the subsidy will go up to the family of four making $80,000. So to a degree, this would be taxing the poor to give to the rich.”

Flores added, “In addition to the fairness issue, once the revenue from cigarette smokers starts declining, taxes will probably go up for the rest of us.”

Williams remains optimistic that voter education efforts against the tax increase are resonating.

“There’s a good chance the measure will fail, because the more people read about what we’re actually doing to our Constitution, and the more they realize how much of the money really is going to the kids, the more likely they are to vote ‘no,'” Williams said.

Sandra Fabry ([email protected]) is state government affairs manager at Americans for Tax Reform.

For more information …

Arguments for and against Oregon’s Measure 50 are at the Oregon secretary of state’s Web site: http://www.sos.state.or.us/elections/nov62007/