Gov. Fallin speaks out after Democrats vote against bill to raise gas, cigarette tax

OKLAHOMA CITY – A measure that would increase the tax on cigarettes and gasoline has passed a House committee, but not with bipartisan support.

During her ‘State of the State’ address, Fallin asked lawmakers to raise the cigarette tax, adding that smoking claims the lives of Oklahomans and costs the state $1.62 billion in healthcare related expenses.

She also called for an increase to gas taxes across the state.

House Bill 2365 would do just that.

The measure calls for a $1.50 per pack tax on cigarettes and a 6 cent per gallon tax on gasoline and diesel fuel.

For the first year, the money raised from the cigarette tax would go toward the Health Care Authority Enhancement Fund, Mental Health and Substance Abuse Services Enhancement Fund, Human Services Enhancement Fund, Oklahoma State University Medical Authority Enhancement Fund and Health Department Enhancement Fund.

After July 1, 2018, 100 percent of the revenue from the cigarette tax would be sent to the Health Care Enhancement Fund.

For months, health care professionals have been pushing lawmakers to approve the tax on cigarettes. They warn that if the cigarette tax fails, more than a dozen hospitals and as many as one in 10 nursing homes may be forced to close.

“I’m currently working with seven hospitals in the state of Oklahoma right now that are living payroll to payroll. Every week, we decide how we can make payroll this week,” Rick Wagner, a CPA working with rural Oklahoma hospitals, told NewsChannel 4 in April.

Advocates said the tax could raise $184 million a year for health care in our state.

However, opponents said it is simply a tax on a low-income segment of the population, and they point out the state could lose revenues along our borders if smokers cross state lines to buy cigarettes and avoid the higher tax.

The money raised from the gas tax would be sent to the Rebuilding Oklahoma Access and Driver Safety (ROADS) Fund.

The Oklahoma Tax Commission estimates a revenue gain of about $215 million from the gas and cigarette taxes.

In addition to those taxes, House Bill 2365 would also eliminate several oil gross production tax incentives.

Those incentives relate to incremental production from secondary recovery projects, incremental production from tertiary recovery projects, reestablished production from an inactive well, production from a production enhancement projects, production from deep wells with a depth between 12,500 and 14,999 feet, production from new discovery wells, production using 3D seismic technology and production from an economically at-risk oil and gas lease.

House Majority Floor Leader Rep. Jon Echols told NewsChannel 4 that those rebates equal about $46 million.

However, Democrats say they are not totally on board with the plan.

They say instead of taxing drivers, their plan would raise the gross production tax on oil companies to 5 percent. Right now, the rate in Oklahoma is 2 percent, compared to Texas at 7 percent and North Dakota at around 10 percent.

“To me, to not tax oil and gas companies at 5 percent and then to pay for that with raising gasoline taxes at the pump is immoral, and I think it’s something that should be fought not only by Democrats but by Republicans as well,” said Rep. Eric Proctor.

On Monday, House Bill 2365 went before the House Joint Committee on Appropriations and Budget and was approved 18-8. The five Democrats on the committee voted against the bill.

“I am disappointed the House Democrats on the Joint Appropriations and Budget Committee voted against the cigarette and gasoline revenue measure to help fund education, public safety, health and infrastructure,” said Gov. Mary Fallin. “They have said they want to fix our large budget shortfall, but where’s the vote? The people of Oklahoma want solutions to the problems our state is facing. It’s time to put aside partisanship to solve our problems.”

The bill now moves forward to be heard by the House of Representatives.