California’s wrangle with tobacco taxes is back in a familiar mix that voters have confronted since 1988 – cigarette makers on one side, health advocates on the other. But now there’s a new dimension: The economy.
Several tax-increase proposals – including one by the governor to generate $7 billion annually for the shaky state budget – are aimed at the November 2012 ballot. Thus far, none have qualified. Negotiations led by the governor’s office are under way to consolidate them or pare them back, on the assumption that recession-weary voters may not be inclined to approve billions of dollars in multiple packages of new taxes. Already on the ballot is an $11.1 billion borrowing for water projects statewide.
But the first statewide tax hike that voters will consider next year will come five months earlier, in June, when they decide whether to approve a $1-a-pack boost on cigarettes to provide money – perhaps $855 million the first year – for cancer research. If the tax is approved, it will bring the per-pack levy to $1.87, in addition to commensurate increases on other tobacco products. There also would be a distribution tax on inventories of about $2 per pack.
Phillip Morris USA, which played a major role in opposing tobacco taxes in the past in California, is bankrolling virtually the entire opposition campaign, which has thus far collected some $2.6 million, including $2.1 million in four contributions alone since August.
Supporters of the proposed tax, who also figured in the battle over the earlier levies, are led by the American Cancer Society, the American Heart Association, and the American Lung Association. The three groups have accounted for all but one of the campaign’s top 20 donations, reflecting some 90 percent of the total $616,000 collected thus far.
Thirteen years ago, voters approved a 50-cent increase on cigarettes; a decade earlier, in 1988, they approved Proposition 99, a 25-cent hike, and over time a 10 percent increase was set aside for the state’s General Fund and a 2 percent increase provided money for cancer research. Cigarettes and other tobacco products also carry sales, use and excise taxes.
Under the latest proposal, 60 percent of the new money would go to grants for researching cures for tobacco-linked illnesses and 15 percent would be used to build and lease research facilities. Of the remaining 25 percent, 20 percent would go to stop-smoking and prevention programs run by the state Public Health Department and the state Department of Education.
Of the remaining 5 percent, law enforcement would get 3 percent and the balance would go to help administer the program through a new nine-member committee.
For those looking for new money for the beleaguered program, the tobacco tax offers hundreds of millions of new dollars. But there is uncertainty about how much money actually will be raised, in part because the higher the tax traditionally drives a reduction in consumption.
In 2010, California Healthline researchers reported an 8.1 percent drop in cigarette consumption between 2008 and 2009, down to 972 million packs. Twenty years earlier, Californians consumed some 2.5 billion packs.
The state Public Health Department also has reported a sharp drop in tobacco sales to minors since 1995. The number is based on a retailer violation rate of 37 percent in 1995 compared with 5.6 percent rate last year.
And while voters generally have favored taxing cigarettes and other tobacco products, they haven’t favored the kinds of huge increases often sought by anti-tobacco activists. In November 2006, for example, voters handily rejected a $2.60-per-pack tax increase.