AUSTIN, Texas (AP) - The Texas Supreme Court on Friday upheld a state tax on products made by small tobacco companies that weren’t part of a landmark 1998 settlement with Big Tobacco.
The Supreme Court in its ruling determined the tax adopted by lawmakers in 2013 is not a violation of the Texas Constitution’s equal and uniform clause.
The 55-cent tax annually generates approximately $500 million to recover health-care costs associated with tobacco-related health problems. It’s also meant to discourage underage smoking, among other purposes.
A state appeals court last year sided with the smaller tobacco manufacturers in ruling that the state could not impose a tax on one group of products while not imposing the same tax on another identical group.
But Justice Don Willett wrote in Friday’s ruling that the clause prohibits the unequal application of taxes to people, not products.
“The court of appeals’ insistence on focusing on the products and not on the entity being taxed is thus at odds with the concerns of the equal and uniform clause,” Willett wrote. “Products do not pay taxes; taxpayers do.”
He said the case came “against the backdrop of national tobacco litigation, a momentous era culminating in some of the largest and most extensive civil litigation settlements in American history.”
Settlements with a handful of leading tobacco companies resulted in payments to more than 40 states of $368.5 billion over the first 25 years.
The smaller manufacturers had argued that the Texas Legislature should have taxed all tobacco companies if it truly wanted to recover health-care costs, according to Willett’s ruling, but the justice said the larger ones already are paying such costs through the 1998 settlement. “It would be nigh irrational to demand these costs two times over,” he wrote.
Texas Attorney General Ken Paxton in a statement Friday applauded the Supreme Court’s finding.
“Tobacco producers who have not taken responsibility for the ill health effects of their products must not enjoy a competitive advantage over producers who do,” he said.
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