Oklahoma Supreme Court voids tax challenge; fuel tax increase in effect June 27

As the state of Oklahoma prepares to increase fuel tax rates this week, the state’s highest court has decided on a petition effort to repeal the enacting law.

The Oklahoma Supreme Court heard oral arguments earlier this month on two challenges to a referendum petition to nix tax increases, which are slated to take effect on Wednesday, June 27.

The court handed down a decision that the petition will not appear on an election ballot. Justices said the wording of the petition is “misleading” and people who sign it will not know what they are voting on.

Tax rate increases cleared to take effect this week include an increase to the state’s current 17-cents-per-gallon gas tax and the 14-cent diesel tax rate. The tax rates have remained unchanged since 1987.

Approved via HB1010, the new law increases the state tax rate for gas and diesel by 3 cents and 6 cents respectively. Both tax rates will be set at 20 cents.

Other increases included in the new law are higher taxes on cigarettes, and some oil and gas production.

The tax increases are estimated to raise nearly $475 million annually. About one-quarter of the new revenue will come from fuel purchases.

The new revenue will help to cover a shift in available transportation revenue through the state’s general fund. The money from the state’s general fund previously routed to roads and bridges will instead be used to cover teacher pay raises.

In early May, a group known as Oklahoma Taxpayers United filed a petition to challenge the upcoming tax increases. The group is tasked with obtaining 42,000 signatures before July 18 to add a question to a statewide ballot.

Two education groups in the state said the petition effort is unconstitutional and it is misleading. The Oklahoma Supreme Court agreed.

The court says the taxpayer group can circulate a new petition and collect new signatures until July 18. If enough signatures are gained, a public vote would likely occur this fall. A special election also could be set to settle the issue.

The state of Oklahoma collected about $430 million in fuel taxes in fiscal year 2017. The fuel tax rate increases are estimated to raise an additional $105 million per year. The revenue will be dispersed following the state’s existing formula.

Nearly two-thirds is routed to the state transportation fund for appropriation by the Oklahoma Department of Transportation. About one-third is sent to local governments for roads and bridges. A smaller amount is available for other forms of transportation.