Tax Increase to Help Fund Teacher Pay

Tax increases went into effect July 1 in Oklahoma for gas and cigarettes in an effort to fund teacher pay raises. However, some are considering other effects of the tax increase such as cutting down the smoking rate, Oklahoma losing its place as one of the top in the world for oil and gas investment and businesses concerned about losing business.

For cigarettes the increase will be $1.03 for a pack of 20, which combined with the previous tax increase from last year, will make the total tax on cigarettes $2.03.

For gas the price will go up three cents per gallon and six cents for diesel per gallon.

Little cigars are also being taxed the same rate as cigarettes and the oil and gas gross production rate is also increasing from two to five percent for new horizontal oil and gas wells, according to the Tax Foundation.

The increase, adminstered by the Oklahoma Tax Commission, occurred after the passage of House Bill 1010.

“It’s going to be used to directly fund teacher pay raises and what has been reported is that this will lead to an average salary increase of about $6,000 dollars per teacher in the state,” said James Machell, dean for the College of Education and Professional Studies at the University of Central Oklahoma.

Paula Ross, director of Communications for the Oklahoma Tax Commission, said the tax increase will generate in excess of $400 million.

“Teachers in Oklahoma are very badly underpaid and have been for a long time,” Machell said. “We are far behind the regional and national average for teacher salaries, and so these added taxes were really badly needed as a source for funding much needed teacher pay raises.”

Machell said there are several issues still occurring that this tax increase will not fix, such as a large number of older teachers retiring, a large number of teachers who are leaving the state and profession, and a lower number of students enrolling into teacher education programs. However, he said the increase is a good first step to fixing the problem.

Teacher pay is not the only thing that is expected to be impacted, the dollar increase on cigarettes is also expected to lower the smoking rate in Oklahoma, especially among younger generations.

“Some of the numbers that have been crunched say that we should have about 17,000 youths that will not start smoking directly because the price increase on a pack of cigarettes,” said John Wood, executive director for the Tobacco Settlement Endowment Trust.

In preparation for the tax increase, TSET raised it’s budget for the tobacco quitting helpline, because the board anticipated an increase in demand.

“Recognizing that a price increase in cigarettes does increase quit attempts on behalf of smokers [because] historically we have received [an] increase in callers to the helpline, we wanted to make sure that we had the resources available to respond to those increased phone calls,” Wood said. “We increased our budget, I believe, by half a million dollars to respond to that increased demand. . .”

Wood said that even before the tax went into effect, TSET saw an increase in the helpline for those who were wanting to make a quit attempt.

“In Oklahoma, 7,500 Oklahomans die every year from smoking related illnesses,” Wood said. “Smoking related illnesses cost Oklahoma a little over 1.6 billion dollars a year, so [the tax increase] is a way to save lives, and it is a way to save state health care dollars. . .”

Cody Bannister, vice president of Communications for the Oklahoma Independent Petroleum Association, said OIPA thinks it will be more difficult for Oklahoma to attract investment and businesses within the oil and gas industry with the tax increase.

“We believe it’s going to damage the industry’s ability to bring capital to Oklahoma,” Bannister said. “Now, that’s not to say the men and women who make up Oklahoma’s oil and gas industry are not Oklahomans first, they want teachers to be paid better, they want to ensure core government services are funded adequately, but they can’t be the only industry to be asked to shoulder the load.”

Bannister said that according to the Fraser Institute, which surveys oil and gas executives around the world, Oklahoma has been one of the top places in the world for oil and gas. Also, Oklahoma was number one for two years in a row and fell to number two in 2017.

When looking at the gross production rate for oil, Ross said that 96.25 percent of the increase will go into general revenue funds, 3.28 percent will go into funding county bridges and roads, and .47 percent will go to the statewide circuit energy district revolving fund. Ross said those three should add up to 100 percent and that is where the increase from the gross production is going to.

Laura Aufleger, vice president for Corporate Communications at OnCue, said she does think that because tribal smoke shops do not have to implement taxes on cigarettes convenience stores will lose business, but that it is hard to tell what the results will be right now.

“I do see a lot of folks buying their products out of state and bringing them back, especially with difference in tax that Missouri has on Oklahoma,” Aufleger said.

Almost all of OnCue’s charitable efforts go towards helping the youth in the community and they support education and teachers, Aufleger said.

Summer is here in full swing and @oncueexpress wants to help you beat the heat while supporting education! Buy an OnCue Express education themed collectors’ cup, and 50¢ will be donated to local schools! #summer ❤🌞🌊 pic.twitter.com/v72RgQAUkG

— OKC Public Schools (@OKCPS) July 3, 2018

“Right now we have a Support Oklahoma Education collectors cup in all of our stores,” Aufleger said. “When you buy the cup, fifty cents will be donated to that stores’ local school system.  This was another way for us to support education and the future of Oklahoma kids.”