Oklahoma officials are pushing to raise taxes on tribal tobacco sales to a level that would reduce or wipe out the competitive price advantage tribal smoke shops have enjoyed for decades.
The effort, if successful, also could make smoking less attractive for American Indians, who have high rates of smoking and smoking-related illnesses.
Gov. Mary Fallin’s general council, however, said the main goal of negotiations with tribes over new tobacco compacts is not to improve health outcomes, but to make tobacco taxes more consistent in the state.
In recent months, Fallin’s staff has been negotiating the compacts with nearly all of Oklahoma’s federally recognized American Indian tribes. So far, five tribes have agreed to new deals: the Kaw, Cheyenne and Arapaho, Otoe Missouria, Apache and Fort Sill Apache tribes. The Muscogee (Creek) Nation’s compact is not expiring.
Agreements with the other tribes were to expire June 30, but the state has granted a three-month extension to 22 tribes with which it is negotiating, General Counsel Steve Mullins said. A few tribes are not in negotiations.
Because tribes are sovereign entities and cannot be taxed, they remit a payment in lieu of taxes to the state via wholesalers.
There are five different tax rates among tribal retailers. Smoke shops within 20 miles of the border with Kansas or Missouri charge either 6 or 26 cents per pack; those outside the 20 miles charge 43 cents, 51.5 cents or $1.03 per pack. Nontribal retailers charge $1.03 per pack.
The state wants to set all tribal taxes at $1.03. That would mean no retail store in Oklahoma has a tax advantage. In return, the state would rebate to the tribes half of the taxes charged at retail outlets on their lands.
“Basically, at the end of five years, in Oklahoma almost every tribe will be at that rate,” Mullins said. “They will buy a (tobacco) stamp for $1.03, but we will refund one half that amount of money. All cigarettes sold in Oklahoma will be sold at $1.03.”
The Kaw’s compact, for example, phases out its lower “border rates,” of about 26 cents per pack, raising the rate to $1.03. In return, the Kaw tribe will be refunded 51.5 cents per-pack by the state.
A tribe could provide some of that refund to a licensed smoke shop as a subsidy to help the outlet undercut nontribal retail prices, but it’s unclear at this point if tribes are willing to give up some or all of the revenue, Mullins said. Customers could see changes in price in about a month, he said.
Tribal leaders supported extending the compacts rather than renegotiating them, but the Fallin administration pressed for new compacts.
“What the governor said was we’re not going to just rubber-stamp and renew the tobacco compacts up for expiration,” said Alex Weintz, Fallin’s spokesman. “But absolutely we want to sit down with every tribe interested in doing so to negotiate new compacts.”
Mullins said he expected the state to reach an agreement with most of the 22 tribes in negotiations by the end of the three-month extension period.
Tribal officials say they hope to allow smoke shops to keep up with tobacco retailers across the state line.
“Our main focus is to keep the market competitive for tribal smoke shops,” said Sara Hill, assistant attorney general for the Cherokee Nation. “The object is not to provide cheaper-priced cigarettes to anyone.”
Muscogee (Creek) Nation Principal Chief George Tiger attributed the state’s push for higher tobacco tax rates partly to years of opposition from nontribal retailers.
“We’ve certainly enjoyed some years where we had a definite advantage,” Tiger said. “Now that gap is closing and I have to think it’s because of some of the bigger corporations who sell cigarettes and, of course, some of the retail associations in Oklahoma.”
Tobacco sales at some shops have declined in recent years.
Whether higher taxes at smoke shops will lead to less smoking among tribal members remains to be seen. But health experts credit higher taxes for helping decrease smoking nationally.
Studies show Oklahoma has one of the highest tobacco use rates in the nation. Smoking is especially high among American Indians, although it’s been declining.
A report released last year by the U.S. surgeon general found that Oklahoma had the seventh-highest smoking rate in the nation from 2006 to 2010 among children aged 12 to 17 and adults aged 18 to 25. Among adults 26 and over, Oklahoma has the fourth-highest rate. Close to half of American Indian adolescents and young adults in the nation smoke, the report said.
The state Health Department reported that in 2011, American Indian adults had the highest smoking rates of all ethnic groups, about 34 percent. They also had the highest rates of lung cancer, with 605 new cases per 100,000 population in 2009.
Raising tobacco tax rates is one of the surest ways to decrease commercial tobacco use, said Sally Carter, tribal liaison for the Health Department.
“It’s really considered a gold-standard in tobacco prevention,” Carter said.
Tribes have taken some steps to lower smoking rates among members.
In recent years, the Cherokee Nation, which has licensed vendors who sell tobacco, has banned smoking on much of its tribal property, said Randy Gibson, program liaison for the tribe’s Healthy Nation initiative. It also has banned “third-hand smoke,” such as smoke odor on clothing, from its child-care program.
The tribe’s anti-smoking efforts have paid off, Gibson said. Health officials have seen a drop in lung cancer rates among tribal members over the past three years.
Still, “a lot more needs to be done because the rate for native versus non-native is still very high,” he said.
Carter said the Health Department has partnered with numerous tribes to help prevent or stop smoking, using media campaigns and referrals from doctors to a tobacco helpline (800) QUIT-NOW, which is available to all state residents.
While ceremonial use of tobacco is an important tradition for a number of tribes in the state, tribal and state health officials say there is a distinction between ceremonial use and addiction to “commercial” tobacco.