California: Voters to decide on cigarette tax increase

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Cigarette consumption in California is relatively inexpensive. In a fact sheet ranking state tax rates, the Campaign for Tobacco Free Kids revealed that while the average levy on a pack of cigarettes is $1.61, California’s is only 87 cents. This low rate puts it at number 36 among all states, and quite a bit below its neighbors Arizona, Nevada and Oregon. New York and Missouri are the outliers, with the highest and lowest cigarette taxes, respectively. The relative tax rates are not necessarily reflected in the total cost per pack.

 RANK BY TAX (1 = highest tax) 
 New York 
 *from Fair Reporters as of July 2015

Amending California’s constitution

In an effort to decrease tobacco use and mitigate the costs of healthcare treatment by raising cigarette prices, a group of citizens banded together to initiate a ballot measure for a $2 tax increase via constitutional amendment. The measure, Initiative #15-0081A1, is titled the Healthcare, Research and Prevention Tobacco Tax Amendment.

California is one of 24 states that allows an initiated constitutional amendment. In some states, the process is so difficult as to be prohibitive, as in Illinois, Massachusetts, and Mississippi. But in others, like California, Arizona, Arkansas, Colorado, Missouri, North Dakota, Ohio and South Dakota, the process is more manageable. 

Section 3 of Article XVIII and Section 8 of Article II of the California Constitution grant citizens, the “electors,” the right to amend the constitution, and sets forth the process. This involves, among other things, presenting the secretary of state with a petition containing the signatures of eight percent of the votes for all candidates for governor at the last gubernatorial election. 

Progression of the amendment

Last November, counsel for the amendment’s proponents submitted documentation requesting that the attorney general prepare a circulating title and summary, which she did on Dec. 15, 2015. Proponents include Tom Steyer, a billionaire philanthropist-environmentalist-hedge fund manager, and the president and chief executive officer of the American Lung Association in California, Olivia J. (Gertz) Diaz-Lapham. 

To get on the November 2016 ballot, the amendment required 585,407 valid signatures. By May 16, 2016, proponents had submitted over one million signatures to the California secretary of state. 

The summary’s terms, which voters will see on their ballots, sets forth the $2 increase per pack, and an equivalent increase on other tobacco products and electronic cigarettes containing nicotine. Revenues from the increase are to be allocated primarily to increase funding for existing healthcare programs, but also for tobacco use prevention and control programs, tobacco-related disease research and law enforcement, University of California physician training, dental disease prevention programs, and administration. Additionally, if the tax causes decreased tobacco consumption, the initiative transfers tax revenues to offset decreases to existing tobacco-funded programs and sales tax revenues. Finally, there is a biennial audit requirement. 

Proponents expect a net increase in tax revenues of between $1.1 and $1.6 billion annually by 2017-18, with revenues decreasing slightly thereafter. The majority of this would be used to pay health care providers, and what remains would fund programs related to tobacco prevention and cessation, law enforcement, medical research on tobacco related diseases, and early childhood development. 

Currently 50 cents of the Golden State’s 87 cents tax goes to California Children and Families First; 25 cents to tobacco use prevention and wildlife; 10 cents to the general fund; and 2 cents to breast cancer research.

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