Tobacco Tax – Conflicting Goals of Prop. 56

cigarette smoking ashesWhat is the tobacco tax increase for? Is the tax proposed in Proposition 56 to reduce smoking or to gain revenue? It seems the proponents’ goal is to be all things — a deterrent to smoking by raising the cost, plus raising revenue mostly for health care. Can they really have it both ways?

Raising the cost of a product means you will get less of it. The idea behind raising the cost of cigarettes and other tobacco products is to diminish and even eliminate their use. Previous tobacco tax increases have been accompanied by reduced use.

In a new study by the Proposition 56 campaign aimed at convincing the business community of the measure’s positive economic impacts, additional costs for a single smoking employee in health care costs and reduced productivity is calculated to be more than $5,000 per year.

The study also notes that, “From an employer ’s perspective, money spent on Medi-Cal is a good investment.”

About a billion dollars raised by the new tax would be dedicated to Medi-Cal. The idea is for an on-going financial commitment to the Medi-Cal program that has seen a dramatically increased population in recent years–and not just because of smokers. California has one the smallest percentage of smokers of any state.

The study briefly remarks on the loss of business for retailers who carry tobacco products asserting that the net benefit of eliminating “all” smokers would outweigh the costs involved from lost revenue of private sector retailers and lost government revenue. In this context, can we call eliminating all smokers a pipe dream?

If cessation of smoking is the prime goal, with all the economic benefits that the study says comes with the end of smoking, why not raise the tax instead of $2 a pack to $20 or more. That should discourage smokers.

But then all the revenue will disappear as well.

How important is the revenue goal of Proposition 56? If revenue diminishes with the decrease in smoking won’t those who benefit from the government dollars look for a replacement? In fact, Proposition 56 calls on the state Controller to transfer some of the new money to programs already benefiting from previous tobacco tax increases to make up the expected revenue loss if this measure passes. It stands to reason that those benefiting from the revenue haul from an increased tax will not want it to disappear.

There’s an example of such logic on the same ballot. California voters will decide on Proposition 55 to continue what was supposed to be a temporary tax.

Hospitals and health care union members are taking a two-prong approach to fund Medi-Cal. Go after dollars from the rich with Proposition 55’s extension of the income tax, and capture money from the poor who tend to make up the bulk of smokers with Proposition 56’s tobacco tax increase.

So, what is the intention of Proposition 56 — is it designed to discourage and ultimately stop smoking, or is it to raise revenue?

This piece was originally published by Fox and Hounds Daily

Comments

  1. “Tobacco” is said to be very bad for us – it is addictive and decreases the life-expectancy of the user. Normally, we would ban such a product (should it be included on Schedule One?), but our government structure is addicted to the cash-flow of Nicotine Taxes, so we discourage people from using tobacco products through advertising (highly offensive advertising in large part) that is paid for with taxes imposed to raise the retail cost of tobacco that (under the normal Laws of Economics) discourages its consumption. The more the advertising succeeds in driving sales figures down, the higher the taxes on tobacco must be to maintain the cash-flow needed to finance the anti-tobacco industry and its satellites.
    When government becomes involved in an economic matter, it only makes things worse as it is incapable of admitting that what it is doing is not only wrong, but incompatible with its goal, and STOP DOING IT.

  2. Important part of this discussing is the fact that they are going to tax vapor products at 67%. This is clear proof this prop has NOTHING to do with public health and has everything to do with MONEY. Science continues to support vaping as a less harmful alternative to smoking, so if this was all about the public’s health, you would want the most dangerous product to have the least advantage in the market, correct? This prop does the exact opposite. Also worth noting, after the last tax passed in prop 99, the CA gov attempted to amend it in 2009 and transfer funds set aside for education programs into the general fund to make up for budget shortfalls. It’s all about money (82% of which goes to insurance companies and medical) Sin taxes are the worst way to make up for budget shortfalls.

  3. UpChuck Liberals says

    As with any tax, is about one thing only…..MONEY. They raise tax on fuel, demand that cars become more efficient or we have electric cars, the tax revenue drop then they start whining that they’re not collecting enough money to pretend to fix the roads. Ditto for electricity. Government is like an addict, they can’t quit spending money without an intervention.

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