Lawmakers lighting up $2 per pack cigarette tax hike

Like a re-lit cigarette, smoke again is rising from Senate Bill 768. By state Sen. Kevin de Leon, D-Los Angeles, the bill would place a new tax on cigarettes of $2 a pack, with an equivalent tax on cigars, pipe tobacco and other tobacco products.

With de Leon slated to become the next Senate president pro-tem later this year, SB768 enjoys increased clout behind it.

According to the bill, the money would go into “the Cigarette and Tobacco Products Surtax Fund, the Breast Cancer Fund, the California Children and Families Trust Fund, and the General Fund, to offset the revenue decrease directly resulting from imposition of additional taxes by this article.”

California’s current tobacco tax is is 87 cents a pack. So $2 on top of that would be a 230 percent increase. The bill’s language diverts some of the revenues to the “General Fund” because a new cigarette tax would reduce cigarette purchases due to people quitting and increased black-market smuggling. The reduced sales thus would cut the sales taxes that also are collected on cigarettes.

Even though Democrats have supermajorities in both houses of the Legislature, it might not be easy to get two-thirds voting margins in an election year. Moderate Democrats with lots of Republican voters might shy away from being labeled “tax increaser.”

Initiative

As a result, as a backup option, tobacco-tax advocates are firing up the California Tobacco Tax for Healthcare Initiative. It has been approved for circulation in California as a contender for the November 4, 2014 ballot. The initiative’s name is “The California Healthcare, Research and Prevention Tobacco Tax Act of 2014.”

The initiative also would raise taxes by $2 a pack, although the money would be disbursed differently from SB768. According to the Legislative Analyst, the money would go to anti-tobacco campaigns, cancer research and to abate budgets that lose money because of reduced cigarette sales.

In an estimate that also would apply to SB768, the Legislative Analyst estimates that a $2 a pack tax increase would increase revenues from $1.1 billion to $1.5 billion a year. However, after backfills, only $830 million to $1.4 billion would go to the specified projects.

Prop. 29

The new proposals are advancing less than two years after Proposition 29 was rejected by voters in June 2012. It would have increased taxes $1 a pack to fund cancer research, anti-smoking programs and law enforcement.

If the new tax increase goes on the November ballot, it also would have a tough time passing because it would be twice the amount proposed by Prop. 29. However, Prop. 29 barely lost, 50.3 percent to 49.7 percent, giving hope to tax increase proponents.

And SB768  is backed by the same coalition which supported Prop. 29: the American Heart Association, the American Lung Association, the American Cancer Society, the Service Employees International Union and Health Access California. All would benefit from the proceeds of the higher tax.

Black market 

The Tax Foundation published a study in Jan. 2012 which found nearly 60 percent of the cigarettes sold in New York state are smuggled from other states, or come from Indian reservations with lower tobacco taxes. The study found that tobacco smuggling and the tax rate have risen in tandem since 2006, a strong indication that tax increases and smuggling go hand-in-hand.

The New York State tax on cigarettes has risen 190 percent since 2006, while the rate of smuggling increased 170 percent. New York’s current rate is $4.35 a pack, a fair amount above the $2.87 tax California would impose should a $2 new tax be enacted by either the Legislature or the voters. But it’s clear, as the Leg Analyst also noted, that smuggling would increase.

The National Taxpayers Union Foundation released an excellent study in August detailing the recent history of tobacco taxes in the states. It found:

* States with low cigarette taxes have lower overall tax burdens;

* Tobacco tax hikes are rarely used to cut other taxes;

* Tobacco taxes don’t forestall other tax increases;

* Tobacco tax hikes may encourage other tax hikes down the road;

* Cigarette taxes don’t spur economic growth.

Other new taxes

Californians already pay the highest gas, sales and income taxes in the nation. Yet California lawmakers, on top of the potential new tobacco tax, also are introducing proposals that create new taxes and fees, including:

* SB241 by Sen. Noreen Evans, D-Santa Rosa, would impose a 9.9 percent oil severance tax;

* SB622 by Sen. Bill Monning, D-Carmel, would create a one cent per ounce tax on soft drinks and sweetened beverages;

* SB700 by Sen. Lois Wolk, D-Davis, would create a five cent tax on single-use paper or plastic bags.

11 comments

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  1. LetitCollapse
    LetitCollapse 7 February, 2014, 11:01

    Read closely. I’m telling you that the gov wants to eventually make the sales and possession of tobacco illegal. They want to make tobacco a controlled substance so that they can throw you in jail and use it as a means to hike the asset forfeitures. The goal is to get the smoking population down to 5%-10% and then boom. It becomes a criminal matter. Private industry is even starting to jump on the bandwagon. CVS is going to discontinue the sales of tobacco products. Did you read about it? lol. The reason given was to protect you from yourself. To save your health. lol. But what about alcohol? Why continue to sell that? The smoker can only harm himself. But if you drink a quart of cheap wine then pour yourself into the driver’s seat of your car you have the potential of taking out a family of 5. And a LARGE %% of fatal accidents involve booze. Why no prohibition on the sales of booze? Hmmm? Profit margin? What about sugary drinks? We know that they lead to obesity, diabetes and all the other associated health complications. Why not ban the sales of those? Why only tobacco? When corporations start supporting government intrusion into our lives it portrays a very scary scenario. But with corporations people can fight back. No one forces you to shop at any particular store, right? At least not yet. Do you know what the definition of fascism is? It’s the merger of state and corporate powers.

    Full disclosure: I am not a smoker and never have been. But I am a stauch defender of free will and a human’s right to choose. If that is stolen from the American people we have essentially lost a primary value and principle upon which our great Land was founded.

    Reply this comment
  2. billyBS
    billyBS 7 February, 2014, 11:15

    It would be funny if pot is legalized and it is taxed less than tobacco. Is de Leon for legization of pot and other drugs?
    From positions this guy has taken, his legacy is to be the face of the clueless California pol to the rest of the county? “They must all be doing drugs to elect these imbeciles.”

    Reply this comment
  3. Ulysses Uhaul
    Ulysses Uhaul 9 February, 2014, 08:19

    Whacky conspiracies about government goose stepping down cobblestone streets grabbing the unfaithful on the way is poppycock.

    The state teeters on being ungovernable due to lack of funds to train unproductive residents and build alternative distribution systems like high speed rail, the Alameda corridor in LA, new multimodal airport hubs.

    Reply this comment
  4. LetitCollapse
    LetitCollapse 9 February, 2014, 11:48

    It’s reported in the news this morning that at about 5am an alleged drunken female driver was driving in the wrong direction on the 60 freeway outside Diamond Bar and collided with 2 other vehicles killing 6 people.

    Yet I do not see any socially conscious retail stores removing booze products from their shelves and banning the sales of liquor to their customers. Why?

    Oh, I have another silly comment and question. We constantly hear about DUI checkpoints in our cities that force thousands and thousands of innocent law-abiding motorists to pull over and get subjected to intrusive police actions. But I never hear about any police sting operations on bars where drinkers actually load up on booze and exit the bar with a total buzz then drive away. Why is that? Wouldn’t it make more sense to pull over a drunk after he left a bar parking lot then to pull over a thousand innocent people in order to find him on a public roadway? If saving lives is so important to politicians and cops why not target the place where the drunks actually frequent? Does anyone on the board have a reasonable answer for me? Maybe I’m missing something.

    Reply this comment
  5. Ulysses Uhaul
    Ulysses Uhaul 9 February, 2014, 12:48

    What does a bunch of drunkard rants have to do with the article?

    Reply this comment
    • LetitCollapse
      LetitCollapse 9 February, 2014, 13:22

      Very simple for most to understand.

      Cigarettes are being priced prohibitively high as a means to make people throw up their arms and quit. The article notes there’s another $2 tax increase in the works. All in the interest of saving lives.

      But why haven’t we seen the same rate of increase over the years in liquor prices? A LARGE percentage of fatal accidents (like the one I referred to on the 60 freeway this morning) are caused by drunks. And ask any medical doctor. Many deaths occur as a result of alcohol abuse. Liver disease, heart disease, diabetes, renal disease, domestic violence influenced with alcohol, etc…

      And why aren’t retail stores banning the sale of alcohol in addition to cigarettes if they are so socially conscious and want to protect us from the wrath that we impose upon ourselves?

      I applaud freedom and the human’s right to choose. If a human wants to smoke 3 packs or drink a fifth of scotch a day that should be his right. As a result he should have to pay higher medical and life insurance premiums for his risky behavior – but he should be able to choose his habits in life.

      When government (and now corporations) place extraordinary efforts to inhibit one insidious habit and not the other – one must question the motive of those organizations.

      Now do you get it??

      Reply this comment
  6. Ulysses Uhaul
    Ulysses Uhaul 9 February, 2014, 18:36

    The world is very imperfect…..most watch things happen while others make things happen…..web site posters generally pray for a perfect world…no happen….and they no make it happen!

    Reply this comment
  7. Pbconcerned
    Pbconcerned 1 February, 2015, 00:49

    The tax hike is necessary to have enough revenue, to pay back the tobacco bonds issued. These bonds were issued and backed by money expected to be paid out to governments from the settlement with the tobacco companies 1998. They issued about $16B in bonds against the future payments of the settlement. They will have a shortfall as the rate of smokers decreases by 3% per year, and Expected decline was based on a 1.8% decrease per year. Now they are beginning to attack e-cigarette sales as they are an alternative to smoking and taxed as local sales tax only. They say they want you to be more healthy….. But it really is more important to just get the $$$$. The US will never try to stop alcohol as it too is very heavily taxed on the vendors, and then sales tax from the sale of alcohol, and the license to sell or serve, is too much revenue for all taxing authorities to give up. Anything that is addictive will be heavily taxed if it can be passed by the people! If it infringes on a higher tax revenue product, they will fight it in the media.

    We are not far from US acceptance of marijuana sales, and when it has a strong foothold, the taxes will go through the roof! But first we must get everyone on board to legalize the “cash cow” of future tax revenue. Get em addicted and watch the money start rolling in!

    Reply this comment
  8. C Morgan
    C Morgan 13 February, 2015, 14:17

    I’m getting VERY tired of the smokers getting picked on with taxes upon taxes just because they’re in the minority. This is ridiculous and unfair

    Reply this comment
  9. Helea
    Helea 9 November, 2016, 04:46

    When people vote for higher taxes on things like cigarettes and soft drinks, it doesn’t mean that people will stop buying these things it means they pay a higher price for things like that which also means they won’t be going out to eat as often, buying clothes and going to the movies. This in turn makes the economy suffer. Movie tickets go up, people don’t hire as often and so the public just bites their own a….

    Reply this comment

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