Foes of Tobacco-Tax Hike Pour Millions Into Race

September 6, 2016 - By Melody Gutierrez

SACRAMENTO — The campaign over a ballot measure that would raise the state’s tobacco tax by $2 per pack of cigarettes is shaping up as one of the most expensive among the long list of initiatives confronting California voters in November.

In August alone, the tobacco industry poured $20 million into fighting Proposition 56, which would increase the state’s tax on cigarettes for the first time since 1999 to $2.87 per pack, up from the current 87 cents, and impose comparable increases on other forms of tobacco. The tax would raise $1.4 billion and be used to fund health care, prevention programs and research.

Mike Roth, spokesman for the Yes on Prop. 56 campaign, said raising the cost of buying tobacco has been shown to be a successful deterrent to smoking.

Several independent studies, as well as research by the U.S. Centers for Disease Control and Prevention, found that increasing the price of cigarettes reduces the demand for them, particularly among teenagers and young adults. The most common way governments increase the cost of cigarettes is through a tobacco tax.

“Prop. 56 will increase our tax by $2 and protect kids and save lives,” Roth said.

The tobacco industry has already lost one major battle in California this year. In the spring, Gov. Jerry Brown signed bills raising the smoking age to 21 from 18 and putting e-cigarettes and other vaping products, many of them made by tobacco firms, under the same regulatory structure as tobacco.

Prop. 56 would also put vaping products under the tobacco umbrella, meaning the tax would also apply, for the first time, to e-cigarettes containing nicotine.

In all, the tobacco industry has poured $37 million into the opposition campaign, which is being led by a coalition of antitax groups. That’s $7 million more than the combined spending, pro and con, on initiatives to legalize marijuana, abolish the death penalty, speed up the death penalty, restrict ammunition sales and require adult film actors to use condoms.

In 2012, when voters narrowly defeated a $1 increase in tobacco taxes, opponents led by tobacco companies spent nearly $47 million against the measure.

“If we are going to tax smokers another $1.4 billion, then more should go toward helping them quit,” said Beth Miller, spokeswoman for the No on Prop. 56 campaign.

Miller acknowledged that devoting more money to such efforts wouldn’t have persuaded opponents to back the measure.

“When there are legal products for sale, there is no industry who would enjoy a targeted tax on them, whether it’s cigarettes or soda or gasoline,” Miller said.

“But the reality is, we have serious concerns about where the money goes,” she added.

Opponents also say they have problems with where the money raised by Prop. 56 wouldn’t go: One of their main complaints is that the measure “cheats schools out of $600 million.”

That’s how much education would receive next fiscal year if the money raised by Prop. 56 went to the general fund. By law, 43 percent of general-fund revenue raised goes to public schools and community colleges.

Money raised by Prop. 56 would go to a special fund, as does revenue from the state’s current tobacco tax.

 “We have a problem with that, given the situation with school funding in California,” Miller said.

Miller declined to say whether the coalition would support the tax if Prop. 56 included more money for schools. Roth, for one, is skeptical.

“Since when has Big Tobacco been a champion for schools and our kids?” he said.

“The tobacco industry is using an age-old ploy — it’s an argument to undermine the integrity of the proposal,” said Larry Gerston, professor emeritus of political science at San Jose State University. “What they are trying to do is tear away voters with an argument that might resonate.”

With 17 ballot measures this year, the goal for opposition campaigns will be to confuse voters, said Bob Stern, former president at the Center for Governmental Studies.

“When voters get confused, they vote no,” Stern said.

Roth said this year’s campaign has a bigger coalition working to pass the measure.

The bulk of the pro-Prop. 56 money has come from associations representing hospitals, doctors, dentists, insurance companies and labor unions.

Billionaire environmentalist Tom Steyer gave $1 million to the campaign last year. Planned Parenthood has also contributed substantially.

California’s current tobacco tax ranks 35th in the country, with the 87-cents-per-pack levy on cigarettes at barely half the national average of $1.60.

Roth said it’s only fair that smokers pay more, given that state taxpayers have to subsidize the cost of treating smoking-related diseases through the state’s Medi-Cal program for the poor. The Campaign for Tobacco-Free Kids, an antitobacco advocacy group, estimates that the state’s costs for smoking amount to more than $18 a pack when factoring in health care costs.

Under Prop. 56, Medi-Cal would receive the largest portion of the tax revenue — between $710 million and $1 billion in fiscal 2017-18, according to the nonpartisan Legislative Analyst’s Office. Schools would receive $20 million for prevention education. Five percent would go to the University of California for medical research of tobacco-related diseases.

Administrative expenses would be capped at 5 percent.

The Legislative Analyst’s Office said the amount each program will receive will decrease each year as fewer people take up smoking or quit due to prevention programs or the higher tax. That could put the state on the hook for continuing to fund those programs, critics argued.

Jim Knox, vice president of government relations at the American Cancer Society Cancer Action Network, a major supporter of Prop. 56, said he doesn’t buy that argument.

“The tobacco tax is more predicable and reliable than sales taxes,” Knox said. “The tobacco tax we passed 28 years ago is still providing a reliable steady source of income to the state. As the revenue goes down because people stop smoking, the costs also go down.”

Both the Yes and No campaigns have one thing in common, however.

They said they will spend whatever it takes to “get the message out.”

History of tax plans

Previous ballot measures to raise the tobacco tax

1988 — Proposition 99

Impose tax of 25 cents per pack

Approved: 58 to 42 percent

1998 — Proposition 10

Raise tax by 50 cents per pack

Approved: 50.5 to 49.5 percent

2000 — Proposition 28

Repeal of Prop. 10 tobacco tax

Failed: 28 to 72 percent

2006 — Proposition 86

Raise tax $2.60 per pack

Failed: 48.3 to 51.7 percent

2012 — Proposition 29

Raise tax $1 per pack

Failed: 49.8 to 50.2 percent

2016 — Proposition 56

Raise tax $2 per pack