If smoking declines gradually, lawmakers can easily adjust to revenue changes. But if the decline speeds up, replacing that lost revenue without cutting publicly favored programs becomes far more challenging. The impact on local governments, already overdependent upon unpredictable sales tax collections, could be especially jarring.
Gov. Mary Fallin is currently renegotiating tobacco compacts to ensure that all retailers collect the full $1.03 per-pack tax. Instead of giving tribal smoke shops lower tax rates, she proposes one rate for all and rebates for tribal governments.
In the short term, Fallin's plan could ease government's financial strains by effectively boosting the amount of tobacco tax collected from the dwindling supply of smokers. In the long run, her efforts will increase price pressures on smokers and encourage even more citizens to kick the habit, which is good. Her efforts could buy Oklahoma policymakers time to determine how to smoothly transition away from dependence on certain-to-decline tobacco tax collections.
A growing number of Oklahomans are kicking their nicotine addiction. It may be time for Oklahoma government to do the same.