Assessing Oklahoma's Tobacco Tax

Hearing participants have little good to say about newest tax

OKLAHOMA CITY -- Nobody had a kind word for Oklahoma's tobacco tax at a hearing held Thursday by the chairman of the House Revenue and Taxation Committee, according to a report in The Journal Record. Of the nine speakers who participated in the nearly three-hour hearing, the only person who did not rail against the tax was the representative from the state Tax Commission, who was there only to present revenue collection figures and brief lawmakers on the state's tax policy.

State Rep. Kevin Calvey, committee chairman, asked each guest speaker if [image-nocss] they felt the state's tobacco tax system was making a monopoly of Indian tribes' smoke shops. Each of the speakers, all representing non-tribal tobacco retailers and/or wholesalers, answered in the affirmative.

"Our stores are bigger, better and brighter," said Mike Thornbrugh, manager of public and government affairs for at Tulsa-based QuikTrip convenience stores. "We're not losing business to somebody better than us in the industry; we're losing it because they have a huge tax advantage."

Thornbrugh said sales of tobacco products for the chain are down 20% since voters approved an increase in the tobacco tax in November 2004. The tax for non-tribal retailers was raised from 23 cents to $1.03 for a pack of cigarettes effective Jan. 1, with the extra revenue earmarked for health-care initiatives.

Though the state reached compacts with a number of Indian tribes to collect the full amount of the increase, exceptions were granted to stores along the state border. However, tribal smoke shops nowhere near the border have been found to be selling cigarettes taxed at just 6 cents per pack, the rate reserved for border stores, giving them a huge price advantage over non-tribal retailers.

Thornbrugh suggested that the system be revised so that all tobacco retailers in the state both tribal and non-tribal sell tobacco products at the same price. The state could honor its compacts with the tribes by paying larger rebates to the tribes. That way, the tribes would still benefit from the compacts but tobacco sales would be more evenly disbursed at the retail level.

Mick LaFevers said he has 10 convenience stores in LeFlore County, and tobacco sales are down about 25%. LaFevers said allowing tribal smoke shops to charge less for tobacco amounts to discrimination. "The whole idea of sovereignty is a misnomer," said LaFevers. "Sovereignty in and of itself means independence. My contention is the tribes are no more independent than you and I. They require the same city services, the police and fire protection, the state's social services, roads and bridges. The only difference is they don't want to pay for them.

"The governor's got out of hand," said LaFevers. "All these compacts are different. He's legislating from the governor's office. How long do the Oklahoma taxpayers have to subsidize the Indians?"

Calvey said Gov. Brad Henry and treasurer Scott Meacham would be invited to the committee's next meeting. But Henry's office released a statement Thursday criticizing the proceedings.

"Big Tobacco couldn't have scripted the hearing any better," said Paul Sund, spokesman for Henry. "It was a one-sided presentation designed to mislead Oklahoma voters and convince them they made a mistake when they approved State Question 713."

There are problems with enforcement, said Sund, but the plan is working to boost funding for health care programs.

State Sen. Cal Hobson, D-Lexington, also issued a statement criticizing the hearing. "For those that care only about selling more cigarettes, which will lead to an unhealthy Oklahoma, then I guess you could say the tobacco tax is indeed flawed and is hurting the deeply lined pockets of big tobacco," said Hobson.