Should California Raise Tobacco Taxes? (Includes Lesson Plan)

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Depending on what voters decide next week, smoking in California could soon become a much pricier habit.

Proposition 56, one of 17 statewide measures on the ballot this November, would increase the state's tobacco tax by $2 per pack, a huge leap  from the current rate of 87 cents. The new $2.87 tax would also be levied on other tobacco products, including e-cigarettes (which now are taxed at a much lower rate than regular cigarettes).

If Proposition 56 succeeds, the new tax would take effect April 1, 2017. It's expected to generate $1.2 billion to $1.6 billion in its first year, according to analysis by the Legislative Analyst's Office. While some of this new revenue is earmarked for smoking prevention and cessation programs, the majority of it will go to Medi-Cal, the state's health insurance program for low-income residents, which covers roughly one in three Californians.

The No on 56 campaign has out-raised supporters by roughly 2-1, with most of the $71 million war chest funded by two of the nation's largest cigarette manufactures: Philip Morris USA, R.J. Reynolds Tobacco Co., and their affiliates . The biggest donor to Yes on 56 is billionaire Tom Steyer, who has  contributed more than $11 million. The latest polls show support for Proposition 56 at around 60 percent, with California's Democratic Party backing it and the state's Republican Party opposing it.

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Supporters of Proposition 56 say the higher tax will raise millions of dollars for crucial state smoking prevention programs and health care services, while helping to potentially encourage smokers to quit and actively discouraging young people from taking up  smoking in the first place.

Opponents claim that the hike would be regressive -- disproportionately hurting low-income smokers. They also argue that the measure is a tax grab by health insurance companies, labor unions and hospitals, with just a fraction of the revenue going to actual smoking prevention programs.

How does California's tobacco tax compare to other states?

California's current cigarette excise tax (a tax levied on specific commodities) is pretty low compared to most other states - 35 out of 50, to be precise. The average state tobacco tax is $1.65.

In fact, California's tobacco tax hasn't been raised since 1998; a

2012 proposition to increase it by $1 per pack failed by less than 1 percent of the vote. Opponents of the measure put up close to $47 million to defeat it, nearly four times what supporters spent.  The current proposed increase would make California's tobacco tax among the highest in the nation (although still far short of New York's, which stands alone at $4.35 per pack).

Smokers in the U.S. also pay a federal excise tax of about $1 a pack on top of state taxes.

In May 2016, the California legislature voted to raise the state's smoking age from 18 to 21, the second state in the nation to do so (after Hawaii). The new rules went into effect in June. The legislature also moved to restrict the use of electronic cigarettes in certain public places, including school grounds and hospitals and restaurants.

How does California's smoking rate measure up?

Despite its low taxes, California actually has the second-lowest smoking rate in the country: just north of 12 percent of adults. Compare that to the national rate of nearly 20 percent or one in five (the smoking rate among California's youth is slightly higher than it is among adults, but still far below the national average). The state's adult smoking rate has declined consistently over the last two decades, sparing more than 1 million lives and $86 billion, according to state health officials.

In 2010, California's smoking rate reached a record low of 11.9 percent (it has risen slightly since then), down from almost 26 percent in 1984. The most significant decrease occurred among adults ages 25 to 44. But while California's current smoking rate is significantly lower than in many other parts of the country, there still are roughly 4.5 million adult smokers statewide.

Why is California's smoking rate so comparatively low?

There's obviously no single answer, but a number of policy measures have received a lot of credit. California has long been a trendsetter in local and state government smoking reduction efforts. In 1995 it placed a statewide ban on smoking in restaurants and workplaces, the first state to do so. Three years later, the ban was extended to bars. California has also spearheaded significant smoking prevention and education efforts, particularly geared toward youth. A 25-cent cigarette tax in 1998 created the California Tobacco Control Program, the first of its kind in the nation, charged with leading aggressive anti-smoking campaigns.

What's the history of tobacco taxes in California?

  • 1959: The state's first tobacco tax was passed by the Legislature. It added 10 cents to the cost of a pack of cigarettes. The revenue went straight into the general fund.
  • 1988: Voters approved Proposition 99, which added an additional 25-cent tax to fund tobacco prevention, education and research programs.
  • 1993: A 2-cent tax enacted by the Legislature created a fund for breast cancer research.
  • 1998: Voters approved Proposition 10, adding a 50-cent tax to fund early child development programs.

Last year, total state revenues from taxes on tobacco products were just over $900 million.

smokingratechartadults20101

Does raising taxes on tobacco products actually reduce smoking?

Source: California Department of Public Health

Yes, according to the Centers for Disease Control and Prevention. "Increasing the price of cigarettes is one of the most reliable and effective ways to reduce smoking and prevent youth initiation," the agency reported in it Morbidity and Mortality Weekly Report on March 29, 2012. The report added: "The evidence indicates that further increases in cigarette excise taxes would continue to reduce the demand for cigarettes, thereby preventing youth initiation, reducing cigarette consumption, and decreasing the prevalence of smoking, particularly among youth and young adults. States can reduce cigarette use even further by investing excise tax revenue in tobacco prevention and control."

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Some economists, however, argue that high cigarette taxes can do more harm than good,  drawing smokers to buy cigarettes in nearby states with significantly lower taxes and resulting in lost tax revenue for California. High costs, it's been noted, could also encourage a black market in cigarette sales, as has become common practice in New York City.