The truth about the tobacco tax

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Why are projected revenues from Oklahoma's new tobacco tax so much lower than projected? An e-mail from Daniel Keating has the explanation:

I was recently asked how things are going with the tobacco compact issue since I serve as chairman of the Cigarette and Tobacco Tax Advisory Committee and there seems to be tobacco related stories each day in the newspaper.

Our committee has held two meetings with another scheduled on December 12. What we have been asked to do is make recommendations to the Tax Commission and the legislature on issues relating to enforcement of the levy, collections and remittances of taxes on cigarette and tobacco products in the state. As you are aware, Oklahoma passed state question 713 last year.

This question was intended to raise taxes on cigarettes and use the proceeds to fund a number of worthy health programs. Most people also thought and were told, it would eliminate the tribal tax advantage over non-tribal stores, which had been 42 cents a pack, to 17 cents a pack.

And how are things going today? Well today, the state is nearly $ 70 million behind on the projected collections, a large portion of Oklahoma's convience store industry is facing financial ruin and layoffs, and a number of major Indian nations and tribes are accused of being "cheaters" as they try to compete with other tribes who have been given compact preferences.

The fact is in 2003, a full year before passage of state question 713, Governor Henry and then Finance Director Scott Meacham negotiated and approved a great number of new tobacco compacts that gave certain tribes a tax advantage of 97 cents a pack, a 130% increase over what had been clearly out of line.

As the administration tries to square this raw deal, we were told it only affects shops located on the border. This is not true. Tribes near Stillwater, Seminole and Norman operate at the 6 cent exception rate. Those tribes not so fortunate pay 87 cents and non-tribal retailers pay $ 1.03. The Governor's compacts cannot be overturned and run until June 30, 2013. The Tax Commission, in my opinion, has little or no jurisdiction. It is not an enforcement body.

Against this background, the committee hopes to bring parity back to the convience store industry and make sure this anti-small business tactic is never used again.

Effectively, Oklahoma now has, at six cents per pack, the second-lowest cigarette tax in the nation. Not exactly what voters were sold, is it?


Jeff Shaw Author Profile Page said:

Bad ideas usually get worse with time. This is no surprise. I am happy to know that at least half of the parties involved in these compacts new a good deal when they saw it.

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This page contains a single entry by Michael Bates published on December 7, 2005 10:40 PM.

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