Oklahoma Smokers

A few news worthy events took place this past week in the tobacco wars.

First the sky did not fall on the Attorney General’s head as he feared it would while doing his ‘Chicken Little number’.

The State of Oklahoma received a new extortion payment from the tobacco industry, this one in the amount of $3,547,932.89. Attorney General Edmondson’s PR staff got the news on-line quickly. Here’s the Press Release.

It points out that seventy percent of the extortion money received or $2.48 million was deposited in Oklahoma’s Tobacco Settlement Endowment Trust Fund, which now has a balance of more than $302 million. Does anyone remember where the rest of it is supposed to go? Yep, right into the pork barrell kitty for Oklahoma’s Legislators to spend as they see fit. Also notice that the Attorney General’s press release proudly points out that this latest payment brings to more than $494 million the extortion money that our very own Attorney General has sucked out of the tobacco companies, or more accurately the wallets and purses of tobacco users. Don’t it make you feel proud?

On the same day that Attorney General Drew Edmondson was patting himself on the back for raking in the money, Paul Sund, Governor Brad Henry’s ’spin man’ was revealing that out of the kindness of its heart that the State of Oklahoma was delaying until May 1st enforcement of the lastest Tax Commission rule regarding smokes shops. This latest rule is yet another attempt to violate the compacts between the Indian Nations and the state.

The announced purpose of this delay was supposedly to give negotiations the chance to head off yet another federal lawsuit. Evidently governor Henry is not aware of the fact that he is cornered by the very compacts his point man in the war on smoke shops already negotiated. The Osage Nation was having none of this idiocy and sued the state again and the result will likely be identical to the last such lawsuit with a federal judge ruling that the state must negotiate with the tribe under the terms of their compact.

Governor Henry you need to wake up and smell the coffee. Just because your negotiator, Scott Meacham, ‘gave away the store’ does not mean you or the Tax Commission can violate the compacts Meacham negotiated and you signed. This is the case no matter how much Tulsa based Quick Trip Corporation whines. If you really want to help Quick Trip you might ask that the First Lady do all her shopping there and have her pick up a couple cartons of cigarettes while she is a it, as the chain is taking a beating on tobacco sales owing to YOUR compacts with the tribes. Compacts which in retrospect make Meacham and you look like a couple of county bumpkins taken for a ride by a used car salesman. A deal is a deal, you bought into it, you signed for it. Now you have to live with it until the compact expires.

Meanwhile, the Oklahoma House was racing to see if it could beat the Governor in violating these same compacts when it passed Senate Bill 1717, by Republican Rep. Ron Peterson, R-Broken Arrow. This bill would permit non-tribal retailers (read that Quick Trip) to sell cigarettes at a price 10 cents more than tribally owned stores if those tribally owned stores are are within a 25-mile radius.

Currently non-tribal stores are forced by Oklahoma’s outlandish $1.03 per pack cigarette tax to sell the same products at a much higher price, typically 87 cents per-pack and sometimes even more than the tribal outlets. The only way the state can reduce the price of cigarettes in non-tribal stores is to waive a major portion of the state tax of $1.03 per-pack on cigarettes. Since some tribes are selling cigarettes with 6 cents tax stamps, adding 10 cents to that makes for a total of 16 cents tax per-pack. Prior to Governor Henry and Scott Meachem’s renegotiating compacts with the various tribes the old cigarette tax was 23 cents per pack PLUS sales tax.

What’s so funny is that if the Legislature manages to pull this off and the tribes do not sue once again, Oklahoma’s tobacco tax increase passed by voters in November, 2004 will actually turn into a tax REDUCTION, something most Oklahoma smokers would greatly appreciate. All I can say is, it’s about time!!!

On Friday, April 7th Oklahoma Attorney General Drew Edmondson shifted into full-scale Chicken Little Mode regarding a possible reduction in the extortion money customers of the big tobacco companies pay to forty-six states each year. Edmondson is terrified that Oklahoma’s slice of the extortion pie, typically $65 to$70 million a year, will be reduced and he is now issuing dire warnings of the sky soon to fall.

In statements following a talk Edmondson gave on tobacco litigation at the University of Oklahoma Health Sciences Center College of Health on Friday, he stated, “The threat is very real. The timing of the threat is still up in the air”. Edmondson went on to state, “It’s a fluid situation right now in terms of whether the companies are going to withhold this year or pay under protest or pay a part of what they owe. The litigation is inevitable”.

The event which put Edmondson into Chicken Little Mode is a New York appellate court ruling on Thursday that disputes over reductions in tobacco payments must go to arbitration. The reduction to the states could amount to more than $1 billion a year, one-sixth of the total extortion money the states receive from ‘big tobacco’, or more accurately the customers of the major tobacco companies, each year.

At the heart of the scare afflicting Edmondson is basic economics. When the states blackmailed the big tobacco companies into paying the $6 billion a year in extortion money, a provision of that negotiated agreement permits the big tobacco companies to reduce their annual payments if their market share has eroded as a result of the higher prices they are forced to charge in order to afford the extortion payments.

With forty-five of the big tobacco companies party to the extortion agreement with the states and eighty smaller tobacco companies not party to it, it is pretty obvious what is happening. Customers of the extorted companies faced with drastic prices increases, coupled with endless increases in state taxes on tobacco products, are opting for the lower priced products of the smaller companies. These products not subject to the extortion fees which hamstring their bigger companies. The market share of the smaller companies is going up while the market share of the bigger companies is going down.

This is ‘Basic Economics 101′ stuff. It is why most of us do not drive luxury vehicles, live in quarter-million dollar homes and jet off to Europe for our vacations. Evidently Attorneys General are not as familiar with ‘Basic Economics 101′ as are normal people, otherwise they would realize that consumers confronted with a choice between premium products they can no longer afford and non-premium products they can afford will always go with the lower priced products rather than doing without.

Mr. Attorney General, let us assure you that the sky is not falling, nor is it going to fall. We would however point out that while the goose that lays the $6 billion dollar golden egg each year is not dead, it is in ill health and to a large degree owing to the greed on the part of politicians. Rest assured that Oklahoma Smokers are familar with basic economics and will continue to find ways to control spending for tobacco products. One such way is to purchase less costly but inferior products. Another way is to elect less greedy politicians.

Yesterday Oklahoma Brad Henry gave his stamp of approval to yet another violation of compacts between the State of Oklahoma and various Indian Nations. In doing so he has personally decided that it is perfectly acceptable to break the very compacts he and his designated negotiator, current State Treasurer, Scott Meacham were so proud of back in 2004.

The facts are simple. Compacts between the State of Oklahoma and the various Indian Nations pertaining to tobacco sales had expired by 2002. At the time out-going Governor Frank Keating did not want to involve himself in renegotiating them, leaving the task to the new governor. Along comes Brad Henry as governor and he designates Scott Meacham as his negotiator in establishing new compacts and negotiate he did.

As part of the compacts between the state and some of the Indian Nations a requirement was included mandating that the state maintain the sales tax on tobacco products. Other aspects of the agreements granted ‘tax advantages’ to the tribes one of which was that the tribes only had to collect twenty-five percent of the then state tax of twenty three cents per pack on cigarettes, or six cents per pack.

Then something really weird happened. The Oklahoma Legislature with the backing of Governor Henry passed a bill calling for a vote of the people to raise the tobacco tax to $1.03 per pack from the then current $.23 per pack. As part of a convoluted formula the sales tax on tobacco products would be eliminated, an additional $.80 per pack would be added bringing the total to $1.03 per pack and the tribal smoke shops would be rebated half the increase or $.40 per pack. Oklahoma voters approved this tax increase in November, 2004 and it went into effect on January 1, 2005.

But wait! What about those compacts that Meacham had negotiated with the tribes and which Governor Henry had signed? Did not those compacts include requirements that the sales tax on tobacco products be maintained? And did they not include requirements that the ‘tax advantages’ the tribes had be maintained even in light of increased tax rates? Of course they did. But when has a little bit of lying stood in the way of greedy politicians wanting to suck more tax dollars out of the wallets and purses of the taxpayers?

January 1, 205 rolled around and Henry, Meacham and the rest of the tax loving crowd of Oklahoma politicians licked their lips waiting for that wave of new money to roll ashore. Only problem was, it wasn’t quite the wave of money they hoped for. It turned out that many tribal smoke shops had through their compacts with the state managed to avoid having to pay the higher tax rate and were in fact selling cartons of cigarettes about $10 less than the price non-tribal stores were being forced to charge under the new tax law.

Mike Thornbrugh, spokesman for Quick Trip stores, Oklahoma’s largest convenience store chain, squealed like a stuck pig about the disparity in taxes pointing out that the store chain had canceled its expansion plans for Tulsa area stores and demanded government “do something” to level the playing field. Thornbrugh of course blamed the Indian Nations for the fact that Quick Trip was taking a beating on cigarette sales and a herd of Oklahoma politicians including Henry, Meachem and legislative leaders took notice. They had to take notice, otherwise the truth, that being that they and the compacts which they created were the core of the problem facing non-tribal stores, would come out. And that would not play well at election time.

Throughout 2005, Henry, Meacham and others tried to devise ways to circumvent the very compacts which Meachem negotiated and Henry signed for if those compacts are honored there’s not a thing the state can do to help Quick Trip or other non-tribal merchants some of whom are figuratively calling for Henry’s and Meacham’s heads on a stake. To make matters worse, leading Republican politicians have been making political hay of Henry and Meacham’s folly in negotiating the compacts.

Confronted with a political disaster Brad Henry did what politicians have done for years, try to break their agreement with Indian tribes. He has now done this twice. The first time was when he approved a plan to limit the number of cartons of cigarettes wholesalers can sell to tribal smoke shops. That plan was shot down when the Osage Nation went to federal court and obtained an order mandating binding arbitration. Now Henry has come up with a new plan, one to require wholesalers to include the $1.03 per-pack tax in all cigarette sales to tribal smoke shops. This plan too is doomed to failure as the Osage Nation has already announced it will be back in federal court on Monday morning. While Forked Tongue Brad Henry can try to lie, cheat and ignore the very compacts he signed, the federal courts are going to continue to make him abide by them.

It is time for Brad Henry, Scott Meacham and the other tax loving politicians to come to grips with reality. That reality is that even though the compacts which you negotiated and signed evidently mean nothing to you, they are going to come back to haunt you time and again. It’s time to act like men, admit your mistakes and promise to do better next time. If you do not do so, odds are that the voters are going to make sure you do not get an opportunity for a ‘next time’.

“It’s a crock. I served my country fighting for these freedoms and now we’re giving them up one at a time. What did I fight for? We’re becoming a communist country.”

Those are pretty harsh words. They were attributed to Vietnam veteran Butch Butler, in a Associated Press report published by the Daily Oklahoma/Newsok.com on April 3, 2006. Mr. Butler is the owner of the Wagon Wheel Diner, located on U.S. Highway 70, near Wilson in Carter County, Oklahoma.

According to the referenced report, eighty percent of the establishment’s customers are smokers. When the smoking ban went into effect on March 1st, Butler complied with the law, declared his establishment “non-smoking” and in the next two days saw his business decline by seventy percent. As a result Butler told his customers to just go ahead and smoke. This in hopes that his rural location would mean that his establishment would just be ignored. Wrong!

The Health Department smoking police swooped down like a vulture eyeing a carcass and shut him down. Mr. Butler’s business was one of four shut down last month by the State Health Department ’smoking police’ for violation of the Oklahoma smoking ban. The business remains shut down as the date of this writing. This while Mr. Butler awaits the approval of his newly completed “smoking room” which must be inspected and approved by the smoking police. Smoking police who do not seem to be in any hurry to approve restaurants attempting to comply with the law.

That Mr. Butler is a victim of Oklahoma’s smoking ban is without question. With an estimated eighty percent of his business comprised of smokers he is at the mercy of the smoking police intent on stamping out all smoking in Oklahoma. Butler had no choice, he was forced to either make expensive modifications to his establishment, in hopes of winning the stamp of approval of the smoking police, or he his business would not survive. At this point in time it is not possible to say whether his business will survive or not. What is apparent is that there’s currently one less eating establishment open in the area of Wilson, Oklahoma. A business forced to close by the smoking police.

Mr. Butler is right, we are becoming a communist country when we take away the rights of private business owners and their customers to choose whether they prefer a smoking or non-smoking policy.

To Butch Butler we can only say, thank you sir for your sacrifices in serving your country during the Vietnam War. Unfortunately it appears that many of your countrymen do not understand the concept of freedom, individual and property rights or the value of a free enterprise. If they did there would be no smoking police and your business would not be closed today.