While taxes are notoriously a snooze-fest, the Oklahoma Supreme Court’s recent approval of the car sales tax sits at the center of a fascinating, non-partisan political debate and a sprinkling of drama.
You may be thinking, “Gee whiz, what a massive over-exaggeration to use the words tax, non-partisan and fascinating in the same sentence.”
Bear with me and you’ll see what I mean.
The Oklahoma Independent Auto Dealer’s Association (OIADA) filed a joint lawsuit with non-member dealerships and private citizens across the state against the Oklahoma Tax Commission to try to stop House Bill 2433, before it went into effect July 1.
While covering this as breaking news about the suit for my summer internship, I interviewed Melanie Killian, Controller of Bolin Ford in Bristow, who thought the bill was unfair to customers and was under-reported by popular media outlets such that customers would likely be surprised by the increase in taxes.
HB 2433 removed a sales tax exemption for the sale of automobiles, adding 1.25 percent back to the revenue being collected, which is expected to give the state an additional $123 million in the next fiscal year.
Leslie Osborn (R, Tuttle), the bill’s author, emphasized that coming into this session legislators faced a $1.2 billion shortfall after two years which also had substantial budget shortfalls.
“We are truly at a crisis point on funding our core state services that citizens expect and deserve,” she said. As a result of the state’s funding issues, Osborn said, “All year my message, even as a Republican, was that we lowered our tax base too low.”
She cited that decreases in the Gross Production Tax from seven percent to two percent and a decrease in income tax to five percent were not replaced with alternative sources of revenue.
“It was imperative that we find new revenue to actually fund core services,” Osborn said, “not to grow government exponentially like people think, but to target dollars to the classroom, to teachers’ salaries, to mental health and to put programming back into prisons.”
Osborn said that throughout the session bills were put forward to increase the tax, but the legislature could not get a supermajority to approve them.
“The automobile excise fee was something that was rather broad based, that would hit different income levels, not disproportionately hurt the poor and it was removing an exemption that was in law,” she said.
An earlier version of the bill failed, so as session was closing without a balanced budget, Osborn rewrote the bill, changing the word tax to the word fee.
The bill was approved by Speaker of the House Charles McCall (R, Atoka) — this detail will become important in the fourth section, just wait — and then passed both chambers by a simple majority.
The OIADA sued the state on the grounds that the bill was passed unconstitutionally.
The Oklahoma Constitution states that any revenue measure must be approved by a supermajority in both chambers of congress before the last five days of session.
This fact begs the question: How did the Supreme Court come to the conclusion that something which sounds so obviously unconstitutional was, in fact, constitutional?
Well, on Aug. 31, in a 5-4 split decision, the Oklahoma Supreme Court concluded, “HB 2433 is not a “revenue bill” because, despite its revenue-raising purpose, it does not levy a tax in the strict sense of the word.”
Luckily for all of us rightly-confused people the court gave three justifications. To save you poor readers from an ungodly block of text, the full rationale has been moved to a box off to the side which you can read if you really want to.
The gist however, is that precedent dictated that making a previously exempt form of taxation subject to taxation again is not a “revenue measure” because it doesn’t levy a new tax.
The non-partisan political debate
The great controversy that resulted from this issue pitted Republicans in the state House and Senate against each other on having a balanced budget and remaining within enumerated constitutional limitations on state government, and split Democrats on their love for a functioning government that can provide for the basic welfare of its citizens and their disdain for regressive taxation.
To be clear, everyone wants a balanced budget. Some people want a balanced budget with few government expenditures and more private-public partnerships, emphasizing fiscal responsibility. Others want a balanced budget with high-quality funding to public institutions, emphasizing social responsibility.
This is a priority for everyone, but for some people other priorities rank higher.
Constitutional limitations on government is one of those higher priorities for many.
This includes those justices who dissented in the ruling, who stated, “There is nothing in the bill to give even a purported purpose or object other than to reach into the people’s pockets to take more money to fund state government.”
While it may be easy to assume this standpoint is held only by conservatives, House Minority Leader Scott Inman (D, Del City) said, “I think the court got it wrong in this case,” referring to the presumed allowance of an unconstitutional overreach of legislative power.
It is easy to see why some may still view this as a revenue raising bill. The original legislation exempting vehicle sales from a portion of the excise tax was written in 1935.
The vast majority of Oklahomans have lived their whole lives without paying the full excise tax on automobiles. It becomes a challenging argument to say that something most people are experiencing for the first time isn’t new.
If you hold this to be true, then the court ruling we witnessed was one in which the judiciary has decided that the legislature, in this case using a legal loophole to get out of trouble, is presumed to be acting in the state’s best interest unless proven otherwise, which is an extremely low level of scrutiny, disliked by conservatives and civil rights activists alike.
I find this to be the most fascinating argument, because it pits pragmatic needs against the backbone of constitutional governments.
In constitutional governments the constitution itself is supposed to be the highest law of the land. Immutable, except when amended by a supermajority.
Even if you feel the decision was made constitutionally, you must admit that it wasn’t made by the language of the constitution, but of the legal precedent set by previous attempts at constitutional review.
What this shows is that Oklahoma’s judiciary has a history of allowing for legislative prerogative. In some ways this isn’t surprising. It seems to be a carry over from both the initial intent of the federal system, that state governments have almost exclusive right to legislate within their own state, and Oklahoma’s more liberal past, which prioritized public welfare over conservative anti-government values.
As a liberal in Oklahoma, this seems to be a necessary move, but also one balanced on a slippery slope. I want the government to be fully funded, so that Oklahoma’s poor can have a basic standard of quality of life. However, considering Oklahoma is predominantly a one-party state, I feel apprehension at the idea that the legislature, which overwhelmingly disagrees with my worldview, can act without significant judiciary oversight.
This is the same feeling that many car salesman are surely feeling right now as well.
For all of us who strongly believe in the superiority of our constitutional, three-branch system, it can be scary to see political reality warp our ideals.
In my other, much more partisan opinion, I hate regressive taxation. Regressive taxation is any tax which has a greater economic impact on the poorest citizens in the community. Sales taxes are the most talked-about form of regressive taxation, because they factor into our daily lives as consumers.
For someone working a minimum wage job, making $800 a month, the 8.5 percent sales tax on groceries eats up a bigger portion of their income than it does on someone making $2,000 a month buying the same groceries.
With less money coming in each month, and necessities like food, housing and transportation that have to come off the top regardless of income, the poorest among us barely have enough leftover to buy a six-pack of beer, if they have anything left over at all.
The car sales tax does this as well. Even an incremental increase in the tax on the sale of cars could be the difference for someone between buying a car and not.
Again, for a two-car household, this means an inconvenience if you have to drive your sixteen year old to their first job.
For a family with one or no vehicles, this means your kid better find a job in walking distance, and if no one is hiring because your neighborhood is oversaturated with unemployed people searching for nearby employment, then you’re screwed.
However, as I said in the first, less-partisan issue, we may have to make an exception for this one tax in the grand scheme of things.
Right now, Oklahoma is struggling to fund the public school system, the department of human services and healthcare programs. Each of these programs, if fully funded, will have a greater impact on the welfare of poor Oklahomans than a small increase in the sales tax on cars.
This instance is an exclusion to the rule about the harmful impacts of regressive taxation, but I beg that the legislature doesn’t make regressive taxation in Oklahoma the rule.
The related drama that should not be ignored
The political debate was accompanied by a political fallout, which ended in Osborn being removed from her position as the Chair of the Appropriations and Budget Committee.
In response to the lawsuits being filed by the tobacco and automobile industries, Republican leadership started to distance themselves from the fee legislation which they helped to pass in the last week of session.
Many Republicans who voted for the measure made public statements agreeing that the move was probably unconstitutional.
McCall and House Majority Leader Mike Sanders (R-Kingfisher) then criticized the Oklahoma Department of Human Services for its decision to cut $30 million in programmatic activities, including those for seniors, the developmentally disabled and adoptive and foster families.
In response, Osborn and two other legislators published a press release discussing the “mischaracterization” made by Republican leadership about the budget and the actions of various agencies.
The next day, McCall, who as previously mentioned approved the fee bills to be voted on, announced to the House of Representatives that he was removing Osborn from the Appropriations and Budget Committee Chairperson position. He replaced her with Rep. Kevin Wallace, about whom he said, “I was greatly impressed with Kevin’s knowledge and capabilities of the budget process last session, and I appreciated his willingness to engage with all members of our Caucus. I believe he will serve our caucus and state well in his new role.”
As this was unfurling, I found it to be a gross display of political showmanship, and a sad day for all Oklahoma women, as one of our only 14 female representatives was removed from her position of authority because a man with more power disagreed with her.
Regardless of whether or not you agree with her political leanings, no one deserves to lose a job they have performed competently, simply because it is politically convenient for their boss.
Oklahomans should not accept this kind of politically devious behaviour from our representatives. We should demand better.
Regardless of the fact that this piece of legislation was approved, the accompanying bill which put a fee on tobacco sales was found unconstitutional. Because of that court ruling, which took $215 million from four agency budgets, Gov. Mary Fallin said she will call a special session of the Oklahoma Legislature, set to convene Sept. 25.