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Press Release

    Raising the Cigarette Tax is Bad Policy

    09/11/2006

    In less than two months, Californians will vote on a new $2.60 per pack tax on cigarettes.  The new tobacco tax would bring the total cigarette tax to $3.47 a pack.  The ballot measure to increase taxes by more than 250 percent is called Proposition 86, or the Tobacco Tax Act.

    According to California’s non-partisan Legislative Analyst, the total revenue from the Tobacco Tax Act of 2006 could be up to $2.1 billion. What will happen to this new revenue?  The main proponents of this measure are hospitals that would claim 40 percent of the new tax revenues. How will they spend the windfall?  What is not explained in the proponents advertisements is that they get to decide how to spend the money.

    Under Proposition 98, which voters passed in 1998, 40 percent of all new tax revenue must first be set aside for public education.  But under the current proposition, the $840 million that should go to public education will instead go to the hospitals that are aggressively campaigning for the new tax. 

    The supporters of Proposition 86 say that this increased tax on tobacco could, “prevent 700,000 kids from becoming adult smokers and prevent nearly 180,000 deaths due to smoking among California kids now under the age of 17.” However, only about 10 percent of the proposed tax revenues would go toward efforts to help smokers stop or to keep kids from starting. 

    Another likely result of the passage of the Tobacco Tax Act would be the increased smuggling and black market sales.  The Associated Press has reported on a study from the New York Health Department showed that “70 percent of smokers bought cigarettes from low or no tax sellers at least once in 2004, while 34 percent to 42 percent relied on those sellers “all the time” or “sometimes.”  Regardless of what the taxman says, some people – perhaps many, many people will purchase cigarettes from low tax states in order to avoid the tax. 

    For example, black marketers could drive to a nearby state such as Nevada, where the cigarette tax is only 80 cents, buy 100 packs and return to California for a quick profit.  Imagine a profit of $2.67 on each pack, $26.70 for each carton and $2,670 for a truck of 100 cartons. 

    Proposition 86, if passed, will lead to a broken system.  Smokers will find a way to circumvent the tax by driving to nearby states.  Do not let the advertisements fool you, Proposition 86 does little to help people stop smoking or prevent children from starting.  It is nothing more than a money grab by people at big institutions willing to use the political process to take from others.

    Proposition 86 is bad policy and bad for California.  Tax increases of more than 250 percent should not pass because of the smokescreen put up by those who stand to gain a windfall.  Proposition 86 should be defeated.

    Matt Schumsky is the California Field Coordinator for FreedomWorks.  He lives in Alpine and can be reached at mattsd8@cox.net