The Oklahoma Supreme Court heard arguments today in legal challenges that have the potential to cut nearly $400 million from the current state budget.
The court allotted an hour to each of three cases, which involve a total of four bills passed by the legislature this session.
Opponents say the bills are unconstitutional tax increases because they were passed during the last five days of session without three-fourths majorities in both chambers of the legislature. One of the four bills originated in the Senate, giving its opponents an additional point to argue.
Senate Bill 845 put an additional $1.50 fee on a pack of cigarettes. It's expected to generate almost $258 million for the state, which the law says will be allocated to various health-related agencies and initiatives.
Oklahoma Solicitor General Mithun Mansinghani said Senate Bill 845 is a public health bill.
"If you took all the money generated from this fee, put it into a pile and set it on fire, it would still save 18,000 lives because of the effects on reducing smoking rates," Mansinghani said.
Attorney Robert Campbell said if the state wants to cut smoking rates, it has other options that comply with the state constitution's limits on taxes.
"Some jurisdictions, for example, have minimum price laws or prohibit discounts or price promotions," Campbell said. "Another, more serious option they had, which was right in front of them, was House Bill 2372. That bill would achieve all of their regulatory goals.
"It increases the tax by $1.50, increases the price of smoking, achieves all of their regulatory goals. The problem is, that wouldn't happen until next year, because it has to go to a vote of the people. ... They needed that money now."
House Bill 2433 subjects cars and trucks to a 1.25 percent sales tax and has been in effect for just more than a month. It's expected to generate $123 million.
The state says the measure simply removes a sales tax exemption and taxes cars at the same rate as anything else. Justice Douglas Combs asked why lawmakers combined a 1.25 percent sales tax and 3.25 percent excise tax to do so.
"When all they really need to do under your argument ... is simply reduce the complete exemption for motor vehicles, and, all of a sudden, motor vehicles are collected a sales tax of 4.5 percent," Combs said.
House Bill 2348 decoupled Oklahoma’s standard income tax deduction from the federal one. Attorney Stanley Ward said you have to look at lawmakers’ intent with the measure: Raising $4.4 million for the state.
"Did they intend that it was going to reduce the amount of income? I don't think anyone, logically, could ever reach that type of a conclusion," Ward said.
"I think that's exactly what it does. It deprives the taxpayers of a possible tax benefit if they increase the federal deduction in conformity with a perceived inflation rate," said Justice Joseph Watt. "I think that's exactly what it does, and I don't see how it raises revenue at all."
House Bill 1449 increased registration fees by $30 for hybrid cars and by $100 for electric cars. Justice Patrick Wyrick questioned the state comparing them to mileage fees paid by trucking companies on the basis of the revenue going to road maintenance.
"An electric vehicle may never drive on our roads, or it may drive on them a whole lot," Wyrick said. "They pay the same fee, regardless. And that's why it starts to sound a whole lot like a tax rather than a fee, because it's not in exchange for any set unit of government service, it's just, 'I'm paying it in to generally help fund the roads.'"
HB1449 is expected to generate $422,000 this year and $1 million next year.
There’s no timeline for a ruling from the court on any of the four challenges, which represent $386 million altogether.
In a first, the Oklahoma Supreme Court streamed Tuesday's proceedings live on the internet.
