But two months before the election, one of the highest-visibility measures also is fairly narrow in scope. Proposition 56 would raise California’s relatively low tobacco tax (relative to other states) by $2 a cigarette pack – and increase taxes by an equivalent amount on all other tobacco products (cigars, chewing tobacco, etc.). It also would significantly increase taxes on electronic cigarettes and vaping products. It has high visibility right now because of a series of advertisements opponents are running on radio stations across the state.

Supporters pitch the measure as a means primarily to boost public health. “An increase in the tobacco tax is an appropriate way to decrease tobacco use and mitigate the costs of health care treatment and improve existing programs providing for quality health care and access to health care services for families and children. It will save lives and save state and local government money in the future,” according to the initiative’s findings.

Gov. Jerry Brown recently signed into law a package of anti-tobacco bills that, among other things, raise the smoking age to 21. Studies of addiction show that teens who begin smoking are more likely to continue this dangerous habit throughout their lives. Backers of this initiative argue that raising the prices of cigarettes is another main way to dissuade people from smoking. And they point to the costs to the health system imposed by smokers.

But the measure’s opponents are focused increasingly on the spending aspects of the proposal. According to the official ballot argument against the measure, “Prop. 56 allocates just 13 percent of new tobacco tax money to treat smokers or stop kids from starting. If we are going to tax smokers another $1.4 billion per year, more should be dedicated to treating them and keeping kids from starting. Instead, most of the $1.4 billion in new taxes goes to health insurance companies and other wealthy special interests, instead of where it is needed.”

An analysis by the non-partisan Legislative Analyst’s Office confirms that only a small percentage of the estimated $1.4 billion in new revenues are earmarked to such programs. The main priority of the new funds, based on the LAO analysis, is to “replace revenues lost due to lower consumption resulting from the excise tax increase.” That reinforces the odd conundrum faced by California and other states. They use tax and regulatory policies to promote public health by reducing smoking, but then struggle to find funds to pay for ongoing programs as the number of smokers – and therefore the number of tobacco-taxpayers – keeps falling.

The initiative then earmarks some funds to law enforcement, to University of California physician training, to the state auditor and to administration. But 82 percent of the remaining funds go to “increasing the level of payment” for health care related to Medi-Cal, the state’s health-care program for low-income people. Prop. 56 opponents therefore argue it’s designed mainly to benefit health-insurance companies and other interest groups – and includes few limits on how they spend the money they receive.

Furthermore, the initiative bypasses educational-funding requirements under Proposition 98, the 1988 initiative that now requires approximately 43 percent of state general-fund revenues to be directed to the public-school system. As the LAO explained, “Proposition 56 amends the state Constitution to exempt the measure’s revenues and spending from the state’s constitutional spending limit. (This constitutional exemption is similar to ones already in place for prior, voter-approved increases in tobacco taxes.) This measure also exempts revenues from minimum funding requirements for education required under Proposition 98.”

It’s not unusual for a major tax hike measure to ignite controversies over how the new revenues will be spent. But there’s a serious question about whether this initiative will meet its health-improvement goals given the way the tax hammers a common product used by people to quit smoking.

In a research paper co-authored with my R Street Institute colleague Cameron Smith, we note the measure boosts excise taxes on vaping by 320 percent. The key, stated goal of the tobacco tax increase is to dissuade people from buying cigarettes. By the same logic then, the massive boost in taxes on e-cigarettes seems designed to dissuade people from using them.

Yet as Public Health England explained: “The comprehensive review of the evidence finds that almost all of the 2.6 million adults using e-cigarettes in Great Britain are current or ex-smokers, most of whom are using the devices to help them quit smoking or to prevent them going back to cigarettes.” That government health agency urges public-health officials to promote vaping as a way to improve public health. Some U.S. studies come to similar conclusions.

Proposition 56 backers argue that vaping hasn’t been proven safe and the devices haven’t been around long enough to know long-term health effects. They also fear teens will begin vaping and then move on to combustible cigarettes, which everyone agrees are dangerous. And they point to a recent University of Southern California study suggesting teens who vape are six times more likely to begin smoking cigarettes than teens who don’t vape.

In reality, the study seems mainly to reflect “the difference between teens inclined to experiment and teens not so inclined,” according to a public-health expert we quoted. Furthermore, the e-cigarette industry doesn’t claim vaping is safe – they say it is a safer alternative to cigarette smoking. Research suggests they are about 95 percent safer.

California has the second-lowest smoking rate in the nation at around 12 percent. Only Utah has a lower percentage of smokers. So Proposition 56 doesn’t effect a broad swath of the public – but it is a contentious measure given questions about where the tax dollars will go and about its heavy-handed treatment toward vaping. Compared to many of the other initiatives on the ballot, this one might seem simple, but it’s about far more than whether the state government should boost taxes on a pack of cigarettes by two dollars.

Steven Greenhut is Western region director for the R Street Institute. He is based in Sacramento. Write to him at sgreenhut@rstreet.org.

This state needs to raise tobacco taxes. For a state as properly focused on health as California, the fact that we have unusually low such taxes is downright weird. We should be well above the national average in our level of taxation.

According to the Tax Foundation, our state cig tax of 87 cents is 32nd highest among the states. The highest is New York State at $4.35. As you might expect, cig taxes generally are lower in the Southeast tobacco states, highest in the Puritanical states in the Northeast, such as New York, and their offshoots in in the West, such as Washington at $3.05.

Strangely, Washington just legalized marijuana. It reminds me of the hippies who used to introduce the movies shown evenings in the auditoriums at the University of Michigan when I matriculated there 40 years ago. They would smirk, “During the movie, no smoking” — pause — “cigarettes.” Then when the lights went down half the audience (although not yours truly) would light up joints.

No wonder America didn’t survive us Baby Boomers.

Tobacco vs. wacky tobacky

And here’s something interesting. In 1996 Proposition 215, which legalized medical marijuana, passed in hippy San Francisco with 78 percent of the vote, but lost in reactionary Sutter County, getting just 39 percent. Sutter is so uptight it even banned alcohol in the 1890s, way before national Prohibition in the 1920s.

Now look at Proposition 29, the cigarette tax increase on the June 2012 ballot that barely lost. SF: 74 percent yes; Sutter County: 35 percent yes. That’s just about the opposite of Prop. 215. So in Frisco, when you give up the coffin nails and get withdrawal shakes, you just start toking. Whereas in Sutter, you’re an Okie from Muskogee and “don’t smoke marijuana” but inhale tobacco like the Marlboro Man.

And here’s something interesting. Orange County generally is considered to be a reactionary place. Not surprisingly, just 42 percent favored the Prop. 29 cig tax increase, especially with the Orange County Register editorial page (on which I still freelance) coming out strong against it.

But you might not expect that O.C. also backed Prop. 215, with 52 percent voting yea. Some of that also must have come from the Register, where longtime senior editorial writer Alan Bock wrote many editorials backing 215, and wrote a book on the medical marijuana movement, “Waiting to Inhale” (a play on the 1995 movie, “Waiting to Exhale“; alas, Alan died in 2011; great guy).

So at least in this comparison, Orange County really does live up to its libertarian reputation, preferring to let people choose what poison they light up with, while SF comes off as a place of hippy hypocrites.

Black markets

Back to the tobacco tax…

What Mathews didn’t even hint at is that bans and high taxes ignite black markets. That obviously is the case with marijuana, where it remains illegal. But it’s also true with cigarettes. I did a lot of research on this in the mid-1990s when Canada boosted cigarette taxes. The evidence showed that a vast black market caught fire once a pack cost $7 Canadian.

Adjusting for inflation and currency exchanges, that would be about $9 in U.S. dollars today. Currently, a pack of cigs in California costs about $7 in grocery stores, including all taxes; a couple bucks less in tobacco stores. So if the current initiative proposal of boosting taxes $2 a pack is passed, a pack would cost $9 at grocery stores, right on the edge of what caused widespread bootlegging in the Great White North.

The Chronicle reported on Nov. 9:

According to a study released last month by an affiliate group of the California Chamber of Commerce, a $2 increase would double smuggling rates in the state to almost 40 percent of cigarettes consumed.

The group, California Foundation for Commerce and Education, estimated that the Bay Area alone would lose $4.7 million in local sales tax revenue and 2,900 retail jobs if cigarette smuggling increased.

Proponents of the tax dismiss the warnings as propaganda.

“These are the same lies as before that never came true,” said Mike Roth, a spokesman for the cigarette tax ballot proposal, which was submitted last month and is pending in the attorney general’s office. If approved, the measure would need 504,000 signatures to qualify for the 2014 ballot. Roth said the proposal would fund new cancer research and discourage current and future smokers from the habit.

Smuggling

Lies? I remember when the cig tax was increased a mere 25 cents back in 1988 with Proposition 99. A local liquor store here in Huntington Beach was knocked off the next day. The owner hired a firm to put iron bars on his front door, over the mere glass door that had been there before. I asked what happened. “They broke in through the door and stole all the cigarettes,” he said. I asked about the expensive liquor. “No, they left that. It’s too heavy. They just grabbed armfuls of cartons and took them.”

And here’s what’s going on in the New York anti-cigarette utopia. The New York Post reported:

The jailed head of a multi-million dollar cigarette smuggling ring and one of his top lieutenants plotted from behind bars at Rikers Island to kill witnesses they believed were cooperating with law enforcement officials, authorities said.

But when ringleader Basel Ramadan placed a phone call to hire a contract killer he was really talking to an undercover NYPD detective.

Attorney General Eric Schneiderman and Police Commissioner Ray Kelly announced the new indictment of Ramadan and Yousseff Odeh on Thursday.

They were among 16 Palestinian men charged in May with running a massive smuggling ring that flooded New York City and the Albany regions with millions of cartons of unstamped cigarettes. Officials said the ring had direct ties to Mideast terrorists and some of their profits may have been funneled to Hamas and Hezbollah.

According to state Sen. Tony Avella, D-Queens, “The fact that 60 percent of all cigarettes sold in New York were smuggled in from other states, that’s unbelievable. It’s incredible.”

If California’s smoke taxes go up $2 a pack, to $3.87, it’ll be happening here too. An whereas Big Apple contraband cigs come from Indian reservations and Virginia, California’s will come from Mexico. If the government can’t stop cocaine and people from slipping into California illegally, how will it stop packs of smokes?

By Joseph Perkins

“California’s lawsuit against the tobacco industry has reached a successful conclusion that provides a major victory in the fight against smoking.” So said Bill Lockyer, then the state’s attorney general, back in 1999.

The settlement guaranteed the state “$1 billion a year in perpetuity,” according to the AG. It was to be used to protect California kids from falling prey to Joe Camel, who would lure them into nicotine addiction.

Fast forward to this week and the release of a new report, “Broken Promises to Our Children,” which examines how California and other states have spent the settlement money Lockyer and his fellow state AGs extracted from Big Tobacco.

Issued by a coalition of public health NGOs, led by the Campaign for Tobacco-Free Kids, the report finds that “despite collecting huge sums in tobacco revenue, the states have cut funding for tobacco prevention and cessation programs to the lowest level since 1999.”

And the report identifies California as one of the biggest offenders.

The Golden State will collect $1.6 billion in revenue this year, the report points out, from the tobacco settlement money as well as tobacco taxes. Yet it will spend just 3.8 percent of that sum on smoking prevention programs.

In fact, the report notes, California has steadily reduced  funding for smoking prevention – the pretext for the state’s multibillion-dollar lawsuit against Philip Morris (now Altria), Reynolds, Lorillard and other cigarette manufacturers – from a high of $134.5 million in 2002 to $62.1 million this year.

A fully predictable money grab

That is precisely what critics of the tobacco settlement, including yours truly, foresaw a dozen years ago.

The War on Big Tobacco really wasn’t about reducing the human cost of smoking, which in 1999 accounted for “almost one in five deaths” throughout the state, the California Department of Health Services claimed, dubiously.

It wasn’t about holding the tobacco industry “accountable for decades of deceitful and illegal marketing of their product to kids,” as then-AG Lockyer maintained, disingenuously.

It was about coming up with a legal basis for shaking down deep-pocket cigarette makers, to create a new revenue stream to support the profligate spending of California state and local government.

Indeed, even before the yearly tobacco windfall started flowing into state and local coffers, the state and the cities began preparing to issue bonds secured with the windfall to receive the anticipated billions of dollars up front.

And they used most of that bond money not to reduce smoking-related deaths, not to curb under-age smoking, but for such non-health-related purposes as repairing sidewalks and upgrading accommodations at juvenile halls.

Then-Los Angeles Mayor Richard Riordan even proposed to spend $100 million of the city’s tobacco loot to defend city cops accused of planting drugs and guns on suspects before being turned down by his City Council.

It is because California has failed to spend its tobacco settlement billions for the purposes intended that the state’s anti-smoking lobby placed an initiative on the ballot this past June, Proposition 29, the California Cancer Research Act, which would have slapped an additional dollar-a-pack tax on cigarettes.

As it turned out, Prop. 29 was narrowly defeated.

That was attributable, in small part, to heavy spending against the measure by Big Tobacco. But also, at least in part, to those who opposed the measure, like yours truly, not because we are smokers, but in protest of how the state has misspent the billions of dollars it already has gleaned from the tobacco settlement and extant  tobacco taxes.

By John Seiler

The backers of the Proposition 29 cigarette tax increase finally snubbed out the butt of their vigil over the June 5 vote. It lost by just 28,000 votes.

Proponents blamed the $47 million spent by the Big Tobacco companies to defeat the measure. Lance Armstrong, the bicycle champion still fighting doping allegations from his racing days, said, “Big Tobacco lied to voters to protect its profits and spent $50 million to ensure it can continue peddling its deadly products to California kids.”

Actually, what really defeated the measure was the state’s political Establishment, led by the Los Angeles Times and the California Budget Project. The Establishment realized that jacking up cig taxes $1 a pack to raise $735 million a year and give it to an new unaccountable cancer research bureaucracy only would worsen the state’s fiscal mess.

The Establishment understands that California is paddling toward Greek fiscal territory and any extra tax money that can be scrounged up has to go to solving the budget mess. Indeed, on June 8, the Times even ran an extra editorial, “The wrong cigarette tax,” reiterating its opposition to Prop. 29 but calling for a new cigarette tax dedicated just to the budget:

“We urged voters to cast ballots against Proposition 29 because at a time when the state cannot afford to fulfill its most basic responsibilities, the initiative would have put most of the new revenue — more than $500 million a year — toward an entirely new agency and a new state function: the funding of disease research that already is relatively well funded by the federal government….

“But our objections to the specifics of Proposition 29 do not mean that we don’t support a new cigarette tax. We do….

“As Proposition 29 would do, part of the money should go toward smoking prevention programs, as well as for smoking cessation treatments. The rest could productively be spent on treatment for smoking-related diseases, so the people who pay the tax receive the direct benefit and the state budget gets some relief.” 

The value of Establishment support or opposition, especially a Times editorial, is worth an unknowable exact amount, but probably many tens of millions of dollars. So expect a new initiative, as the Times suggested, on the November 2014 ballot along the lines indicated. It might raise taxes $1 a pack to fund lung cancer and other smoking-related treatments, relieving the general fund of spending on such treatments through Medi-Cal.

California Budget Project

Another major Lucky Strike against Prop. 29 was a study by the influential liberal think tank, the California Budget Project. Its longtime executive director, Jean Ross, recently became the head of the Ford Foundation, a pillar of the Eastern Establishment. Usually the CBP looks favorably on tax increases. But a May Budget Brief found, in particular, that Prop. 29 would slam poor people:

“Increasing the cigarette tax would have a disproportionate impact on low-income Californians because they spend a larger share of their incomes on tobacco products. National data show that in 2009, individuals with incomes in the bottom fifth of the distribution spent an average of 0.9 percent of their incomes on cigarette taxes, compared to an average of less than 0.1 percent for those in the top 1 percent. In part, this disparity stems from the fact that the cost of a single pack of cigarettes makes up a larger share of the incomes of low-income individuals.

“It also reflects the fact that low-income individuals are more likely than others to smoke. In 2008, for example, nearly 20 percent of California adults with household incomes of $20,000 or less were smokers, compared to fewer than 10 percent of those with household incomes of more than $100,000 (Figure 4).”

The implication is clear: Poor people will have less money because of the cigarette tax. They then will have to depend more on state services. Which will put even more pressure on the general-fund budget. The state’s deficit will get even worse.

The Budget Project looked at the big budget picture:

“Programs funded by Proposition 29 would be “locked in,’’ limiting the ability of the Legislature to modify spending in response to economic, budget, and demographic changes or other health-related research needs that may emerge in the future. In addition, these revenues would not be available to support other programs or to help close future budget gaps. 

“Finally, to the extent that voters approve new revenues for a specific purpose through an initiative, such as Proposition 29, lawmakers or voters may feel less inclined to subsequently approve additional revenues regardless of the purpose.”

That’s a key concept. The Establishment’s push now is for Gov. Jerry Brown’s $8.5 billion tax increase on the November ballot. Had Prop. 29 passed, voters might consider that they already had performed their socialist duty for 2012 in June, and didn’t need to do so again in November.

Black market

There’s also strong evidence that a hefty tax increase, such as Prop. 29’s $1 a pack, would make much worse already worrisome black market activity. When New York was boosting smoke taxes a couple of years back, the Huffington Post reported:

“NEW YORK — The big cigarette tax increases that many states are instituting to balance their out-of-whack budgets are raising fears that the trend will make black-market smokes more profitable and lead to more cigarette smuggling.

“Cigarette smuggling has been going on for generations and already costs states untold billions in lost tax revenue.

“Criminal gangs stock up in low-tax states like Virginia and Missouri, truck the cigarettes north and illegally resell them in high-tax states like Michigan and New Jersey. Other buy cartons and cartons of tax-free smokes on Indian reservations and sell them elsewhere. Buyers order untaxed cartons of murky origin on the Internet. And ships arrive from China carrying cargo containers filled with counterfeit cigarettes.

“Law enforcement officials and others worry that the widening price spread between taxed and untaxed cigarettes will only make the situation worse.”

California is too far from Virginia and other states in the Tobacco Belt to worry much about smuggling from there. But there are many local Indian reservations with low-tax cigs. And our Los Angeles, Long Beach, San Diego and San Francisco ports are among the largest in the world, daily unloading billions of dollars of goods.

Those born in America generally don’t have much of a taste for foreign cig brands. But they might acquire such a taste if the price of U.S.-made smokes is high. And California, of course, has a large immigrant population, whose smokers picked up the habit puffing brands from other lands.

For now, at least, a new cigarette tax has been defeated. But the demise of Prop. 29 clears the ash tray for the big push for Brown’s tax increase in November.

By John Seiler

Usually when I work, I listen to classical music. But sometimes I put on the rock I grew up with, usually the Stones, Hendrix, Cream, The Who, Dylan, the MC5, etc. A good way to do that is on YouTube, where you can click on a video stream of up to 100 videos of the artist and let it ride.

Today is a a shockingly beautiful day in Huntington Beach, the kind the government uses to entrap us into staying here and paying record high taxes. So I put on a stream of Dr. Mellow, John Denver, a Country Boy taking a Jet Plane on a Rocky Mountain High.

Then my reverie was rudely interrupted by an ad by the Proposition 29 tax-increase obsessives. A screen shot is above. The whole video is below. It’s called “Standing Up to Big Tobacco.” Prop. 29 is a buck-a-pack increase on cigarettes to fund cancer and other research and will be decided by voters in the June 6 election.

The ad features several people who got cancer from cigarettes, or who remember relatives of friends who died from puffing the coffin nails. They attack the greedy tobacco companies for tricking people into inhaling tobacco smoke, tar and nicotine.

But wait a minute! It’s been 48 years since the Surgeon General’s 1964 report on the hazards of tobacco. Since then, we’ve all been indoctrinated in how harmful smoking is.

I remember back in 1967 I wrote a little anti-tobacco play for my 7th-grade English class at Franklin Junior High School. It was my first editorial.

At this point, everybody, including the people featured in the Prop. 29 ad, knows that smoking has health consequences. The tobacco companies also have been turned into boogeymen. Their ads are severely limited. The government robs them every which way it can.

And the government, mendacious as usual, won’t tell you that there actually are some benefits to smoking. I also know people who self-medicate using cigarettes to calm themselves down. Why should they be denied their medical tobacco, or forced to pay sky-high prices for it? It’s their choice. They have free will. Let them choose it.

Kids and tobacco

What about kids smoking? That’s a parental problem. Does government have to take over absolutely every function formerly performed by Mom and Pop? And if you’ve ever seen the slop they feed kids in the government schools, you know there’s no real concern for the youngsters’ health.

Because poor people smoke more than rich folks, all cigarette taxes are highly regressive. So Prop. 29 would be an assault on the poor.

Black market

Then there’s the black market problem. I wrote about this a lot in the latet 1990s when Canada’s taxes zoomed up to $7 a pack, sparking a huge black market. The tax take from tobacco actually dropped. The Canucks got wise and cut the cig taxes.

When I was checking out at Vons yesterday, I noticed Marlboros and other top brands were on sale for $6.99 a pack. With sales tax, that’s about $7.55. Throw on a new Prop. 29 tax, and it’s $8.55. There’s been inflation since the late 1990s, so the situation might not be as bad as that in the Great White North 15 years ago. And cigs commonly are cheaper at a tobacconist’s shop.

But the Prop. 29 tax still would put California close to major black-market territory. And Californians are a lot more anarchic than the placid Canadians.

I’m not sure if I’m going to stop listening to YouTube videos. Finding out where the tax obsessives put their ads is part of what I do. It’s a tough job, but somebody’s got to do it.

The video also talks about reducing tobacco use. But Californians already smoke less then people in any other state but Utah. The rate was just 11.9 percent in 2010, and dropping, close to half the national rate of 21 percent. About the only way you could reduce it faster would be to shoot smokers.

Cancer research

Oh, and what about that cancer research the tax would fund? For one thing, California already is so heavily taxed that this would be another blow to the state economy. When I wrote about this before, a Prop. 29 backer assured readers that this tax is different, because it only would hit evil smokers and tobacco companies, while directing the boodle directly to the cancer-fighting boffins.

But all government money is fungible. This also is another exercise in “ballot-box budgeting,” in which wealth special interests grab ahold of a chunk of the state budget for their own purposes. It’s another blow against fiscal responsibility and accountabilty in a state that has had neither in decades.

And as much as I despise our state legislators, they’re actually are the ones who have to balance state budget interests. The initiative process should be changed to ban all mandatory spending, and to repeal all previous mandatory spending.

The state’s taxpayers, including smokers, already are tapped out. Grabbing $1 billion from smokers and the tobacco companies means that those people and companies will have less money to spend on other things, such as food and clothing for their children. More of them will slide into poverty, sign up for state programs, and get some of the taxpayers’ money, worsening the state budget deficit.

By the way, governments and research groups already have spent hundreds of billions of dollars on cancer research, yet there’s still no cure. It’s the nature of bureaucracies not to perform their ostensible functions, but to perpetuate themselves. The Proposition 71 stem-cell research money supposedly included safeguards that it would be spent properly, but it’s all been wasted at a cost of $6 billion in bond payments.

More crime

An increased black market will bring greater crime, including murders around cigarette gangs. Just think, with smokes going for $8.55 a pack, a carton is worth $85.50. Ten cartons are $855.00. That’s a lot of money for a commodity that’s light and you can scoop up in your arms.

I remember when the cig tax was increased a quarter back in 1988, when stoned voters passed Proposition 88. A liquor store near where I lived was knocked off that very night a couple hours after the store closed. The owner had to put up an iron gate. “Did they also take the expensive booze?” I asked him the next day when I stopped in for a six-pack. “No,” he replied. “Just the cigarettes.” Even then, a fifth of Jack Daniels wasn’t worth as much as a carton of smokes, and was heavier and more breakable.

The Prop. 29 ad already is hurting the state. I’m ticked off now and Dr. Mellow doesn’t do. How about the MC5? Yeah. Here’s “Motor City is Burning” by the 5. (It’s about the 1967 Detroit riot.)