OKLAHOMA CITY — Several Oklahoma Supreme Court justices suggested Tuesday that the Legislature’s approval of hundreds of millions of dollars in new revenue-raising measures earlier this year does pass constitutional muster.
Auto dealers, cigarette manufacturers and other interests have launched a court challenge to the increases. Attorneys for them told the state’s highest court during oral arguments that the new fees are actually unconstitutional “taxes” that violate a state constitutional prohibition against passing revenue-raising measures in the final five days of a legislative session and without a supermajority of lawmakers.
The measures include legislation to remove a 1.25 percent exemption on auto sales and create a new $1.50 fee on a pack of cigarettes to help close an $878 million hole in the budget for the fiscal year that began July 1 and avoid more cuts to state agencies and services.
“This bill was passed not figuratively — but literally — in the 11th hour,” said attorney Clyde Muchmore of the Oklahoma Automobile Dealers Association. Lifting the exemption will raise an estimated $125 million.
“It has the effect of raising revenue,” Muchmore said.
But some members of the state’s highest court said the measure simply eliminated a tax exemption put in place by lawmakers in 1937 and is not a new tax.
“The tax was already in place and the exemption was in place,” said Justice Noma Gurich.
“I see an exemption as an extremely different creature,” said Justice John Reif.
The new cigarette fee was also passed in the final five days of the legislative session and without a supermajority of lawmakers, said former U.S. Attorney Robert McCampbell, who represents Phillip Morris USA Inc., R.J Reynolds Tobacco Co. and others in a separate lawsuit.
“It was passed in the last afternoon of the last day,” McCampbell said. “They could not have balanced the budget without that.”
But Oklahoma Solicitor General Mithun Mansinghani said the fee was adopted under the state’s powers to protect the public welfare by discouraging smoking and is not subject to the constitution’s revenue-raising guidelines.
“Without this bill 18,000 more people will die of smoking-related illnesses. That doesn’t sound like a revenue-raising bill to me,” he said.
Several justices questioned attorneys about the state’s power to adopt legislation and fees to protect the public good.
“Isn’t it true that tobacco has been taxed throughout the history of this state?” said Justice Noma Gurich. The last increase was authorized by a vote of the people in 2004, she said. The additional $1.50 fee will raise the total to more than $2.50 per pack.
Justice Patrick Wyrick characterized the cigarette tax as a “classic sin tax” to discourage smoking.
“The problem I have is where do you draw the line?” Wyrick said.
Justices did not indicate when they will hand down a ruling.
A separate lawsuit by Republican gubernatorial candidate Gary Richardson alleges three revenue raising measures, including lawsuit creates new fees for registering electric and compressed natural gas vehicles that is estimated to raise more than $1 million a year, were also adopted in violation of the constitutional provision.