California Cigarette Tax Hike Election Too Close to Call

California Cigarette Tax Hike Election Too Close to Call
June 12, 2012

Taylor Smith

Taylor Smith is a policy analyst for the Government Relations Department at The Heartland Institute... (read full bio)

The results of a ballot measure that would raise California’s cigarette tax from 87 cents to $1.87 a pack are too close to call. After 100 percent of precincts reported 50.4 percent opposed versus 49.6 percent in favor, the final tally won’t be released until hundreds of thousands of mailed-in, dropped-off, and provisional ballots are counted.

The June 5 ballot measure, known as Proposition 29 and more formally as the California Cancer Research Act, would raise excise taxes on all tobacco products. State officials project it to raise approximately $735 million a year. Three-quarters of that money is supposed to go toward cancer research, but opponents of the measure argue there is no guarantee that is how the additional money eventually would be used.

‘Sensing a Ceiling’

“Although the Secretary of State says the race remains too close to call, the measure right now is losing by about a percentage point. So even if the tax increase happens, it will be by the barest of margins,” said Joseph Henchman, an attorney and policy analyst at the Tax Foundation.

“While 14 states raised their tax in 2009, only six states did so in 2010 and just three states in 2011,” he added. “Voters perhaps are sensing that a ceiling has been reached on how high cigarette tax rates should go. Key considerations include the use of taxes on tobacco users to fund general government programs and the fact that cigarette taxes are one of the most regressive ways to fund government.” Tobacco taxes are widely recognized as regressive, meaning they disproportionately affect low-income persons because they are more likely to be smokers than persons at high income levels.

Californians for a Cure, which backs Prop 29, wrote on the organization’s “Yes on 29” Web site, “Prop 29 is and has always been about saving lives and fighting tobacco-related diseases. With less than 1 percent separating defeat from victory, we remain vigilant and ever hopeful, no matter how long the odds.”

Dubious Priorities

Though Prop 29 supporters cite the extra dollars that could flow to cancer research if the measure passes, opponents point to California’s budget deficit of more than $16 billion, huge unfunded retirement liabilities for government employees, and other fiscal problems to argue the measure does not address pressing state priorities. They also point to the temptation legislators would have to divert the money to other purposes.

National Democratic political commentator Bob Beckel told reporters, “If anybody believes this stuff is going to pay … [for] cancer research, they are kidding themselves.”

“Voters recognized that with California’s 11 percent unemployment and a budget deficit of $16 billion dollars, it makes no sense at all to raise taxes, even for a good cause, that will do nothing to fix these problems,” said Jessica Headley of Americans for Prosperity in California.

The outcome might not be known until early July.

Taylor Smith (tsmith@heartland.org) is a policy analyst at The Heartland Institute.

Taylor Smith

Taylor Smith is a policy analyst for the Government Relations Department at The Heartland Institute... (read full bio)