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| Mary's Little Lamb supported these illegal bills - |
Fallin and Legislative Leadership Looking
Pretty Stupid Right About Now
Not that they care as paying back the donor class is always first on their mind but Governor Fallin and House and Senate leadership is looking pretty darned stupid after the stinging defeat at the Supreme Court on SB 845, the cigarette tax passed in the waning days of the 2007 legislative session. This ruling leaves a two hundred million dollar hole in the 2018 budget and will likely mean a special session short of miraculous improvement in tax income in the next few weeks. We are talking $30,000 a day in direct costs of running a special session and it would require the session last more than one week due to the Constitutional prohibition on passing revenue raising bills in the final five days of a session. Worse, the agenda will be set by Governor Fallin, the lame duck RINO herself. Not many people are going to expect her to call for cutting government waste or useless commissions or departments, all that tramp knows is raising taxes and raising fees.
At issue in these cases is if the Oklahoma citizenry has the power to dictate what the legislature can and cannot do. SQ 640 passed in 1992 hobbled the legislature and demanded a ¾ majority to pass revenue raising bills or a vote of the people. The Supreme court has ruled that it is not to parse the language as lawyers but to read the Constitution as a lay person would as it is a strict instruction to Oklahoma Government as to the will of the people. At issue is over ten billion dollars in new taxes that can be passed by a 51% vote of the legislature.
There are three other challenges that were heard at the Supreme Court on the same date, HB 2433 that added a sales tax upon vehicles and left the existing 3.25% excise tax in place, HB 1449 which added a $100.00 tax on electric vehicles and a $30.00 tax on hybrid vehicles, and HB 2348 which uncoupled the Oklahoma annual standard tax deduction from the federal deduction level.
To judge the chances of those three bills we nee to look at exactly why the Supreme Court struck down the new cigarette tax. The short version is that the legislature failed to follow constitutional requirements for revenue-raising measures and tax increases.
- First the measure was a Senate bill that created a cigarette tax, sending new revenue sent to the general fund to pay for government operations and not as a smoking cessation effort. Senate bills cannot be used to raise revenue, only House bills.
- Second it was touted as a fee but was really a tax. Fees can be raised but fees are always a tax paid in return for a closely coupled benefit that the person obtains after payment of the fee. Filing a court case or getting a wide load permit are valid examples of fees. As around one half of one percent of the new "fee" would have been spent on smoking cessation it was a pretty bold lie to claim it was a fee.
- Third, the bill was passed in the last five days of a session, something that is constitutionally prohibited in Oklahoma.
- Fourth, the bill was passed with a bare majority and a super-majority is required to pass both chambers if it is a tax increase or revenue-raising bill.
As $224 million of the projected income was sent to state agencies that money will have to be replaced or budgets cut in order to escape across the board cuts to all state spending. $70 million went to the state Medicaid agency, another $75 million went to Mental Health and Substance Abuse Services, and $69 million went to Department of Human Services. Proportionally between 7 and 23% of the agencies 2018 budgets were comprised of this funding source, 7%, 23%. and 10% respectively.
Will the remaining three tax increases survive the court challenge? The Supreme Court took the unprecedented step of putting the oral arguments online so they know that this has generated a lot of interest from the public and is a point of blow back should the court gut SQ 640. To determine what the court might do lets look at the bills one by one and compare them to the four points that the cigarette tax failed.
The next three bills were challenged by Oklahoma Gubernatorial candidate Gary Richardson and the man actually arguing the case before the court on Tuesday was none other than the guy that spearheaded SQ 640 that put in place the right of the people to vote on tax increases not passed by a super-majority. They guy was speaking without referring to his notes, he had lived this law.
HB 2433 is the sales tax on vehicles. It is a House bill so it passes the first challenge. It is specifically called a tax multiple times so it fails the second challenge as the legislature didn't attempt to call it a fee. Third it was passed in the last week of session so it fails the third challenge, and it also passed with a bare majority so it fails the fourth challenge. However, they might argue that the bill merely removed an exemption on sales tax on vehicles and thus isn't a revenue raising bill but an expenditure. However to get there they need to use the 1956 Leverage Supreme Court case which had to do with auto dealers transferring car titles out of state in order to sell the car as a "used" vehicle to escape taxes. The result of the decision was to define what the definition of a new car was. Removing an exemption might not be a passed tax in the strictest sense but rather than just remove the exemption and charge 4.5% sales tax on cars they lifted part of the exemption and charged enough tax to bring the excise tax up to sales tax levels. The only other case impacting was the Fent VS Fallin case that covered whether a revenue raising bill also covered a bill that lowered taxes. The bigger issue was the intent of the legislature when the bill was passed and in this case the state was in dire need of cash and not worried about alternative fuel vehicles not paying for roads. The Oklahoma Supreme Court should find this bill unconstitutional. You can find the oral arguments on this bill here.
HB 1449 added the tax or fee upon electric and hybrid vehicles. Again it was a House bill so the first challenge is passed. However the bill calls it a Motor Fuel Tax Fee and it is certainly a tax. The money is deposited into the State Highway Construction and Maintenance fund which is closely related to the purpose the "fee" is supposedly being collected for so it has a fig leaf defense on the fee however the justices argued in the tobacco fee case that there is no positive proof that the purchaser of a gallon of gas intends to use the state highway system as much fuel is purchased for lawn mowers and off road equipment such as ATVs or tractors or construction equipment. The point being that as a "fee" it has a chance but as they called it a tax and it goes into a fund filled by gas and diesel taxes the Supreme Court might just call it a tax increase instead of a fee. That would cause the bill to fail the third and fourth challenge as it was passed in the last week of the session and with a bare majority. Ultimately the Supreme Court should find this bill unconstitutional.
Crucial to the discussion is if HB 1449 had a purpose of raising revenue or was it a regulatory change that incidentally raised revenue. The answer is that the legislature raised millions of dollars through this bill at a time when they were searching for ways to plug a 878 million dollar budget gap. Another point is that the buyer of an electric or hybrid car pays the fee regardless of the amount of actual mileage driven therefore calling it a fee breaks down as it might not be proportional to actual use. Remember that a fee is for a particular set of government services, not a general tax on an item or service.
That leaves HB 2348 which uncoupled the standard tax deduction from the federal deduction level. There is some concern that the case isn't ripe as the federal deduction level hasn't been raised. Yet the legislature projected the increase in taxes, foretelling that the feds are going to raise the deduction to counter inflation. To say otherwise is to say that the bill didn't raise any revenue and thus the budget wasn't balanced. It was a House bill so the first challenge is cleared, it was a change in deductions rather than a tax increase but the intent was clearly to raise additional income for the state which is no different than raising the tax rate. The bill fails the last two hurdles if it is ruled a tax increase instead of a special interest exemption that is being repealed which is going to be a difficult thing to logically explained as all people are affected except those that itemize deductions.
Kudos to Gary Richardson for taking on the defense of SQ 640, the will of the people, and the state constitution. We didn't see Todd Lamb or Gary Jones fighting this unconstitutional overreach, in fact both signed off on the budget as their duties require without bringing up that the bills were unlawful.
