August 16, 2009 - As California's fiscal crisis deepens, despite desperate efforts by Gov. Arnold Schwarzenegger and the Legislature, the state's politicians are casting about for ways to relieve the financial — and political — pressure.
That's why, almost by default, raising the state's cigarette tax, now 87 cents a pack, has again moved to the Capitol's front burner.
California - it's been a decade since the cigarette tax was increased..
The American Cancer Society and other anti-smoking groups are pushing a higher tax on smoking and other tobacco use, citing increases in other states, 10 just this year, that have made California's levy relatively low.
The Legislature's majority Democrats already have endorsed a $1.50-per-pack increase that they contend would raise $1.2 billion a year. The state Board of Equalization made the $1.2 billion estimate for a $1.50 per pack increase — indicating that nearly tripling the current levy would scarcely double the revenue because of continued declines in smoking and at least some increase in smuggling untaxed cigarettes into the state.
Any increase in tobacco taxes, however, would require at least some Republican support because of the constitutional requirement for two-thirds votes on new taxes.
So it's not surprising that tobacco companies have been ramping up their opposition, distributing a study of cigarette taxes by the Michigan-based Mackinac Center for Public Policy contending that more than a third of the cigarettes consumed in California now are from the black market. The tobacco industry argues that raising cigarette taxes would encourage more smuggling and fail to generate the purported $1.2 billion in new revenues.
The Mackinac study estimates that 36.6 percent of California's cigarettes are smuggled: 10.7 percent "casually" by individuals, 8 percent commercially by professional smugglers, and 15.5 percent from Mexico. But the Board of Equalization estimated in a 2007 study of untaxed tobacco traffic that less than 15 percent of cigarettes come from the black market and that commerce in untaxed cigarettes and other tobacco products had declined due to more vigorous enforcement.
Taxing cigarettes is politically attractive because polls consistently show it to be one of the few popular levies. However, some critics argue that it's a regressive tax that falls mostly on lower-income consumers, and that tobacco revenues will fade as smoking declines, making it an unstable source of money.
Californians consumed nearly 150 packs of cigarettes per capita per year four decades ago, but consumption has now dropped to under 40 packs, some 1.4 billion packs a year in all.
Two voter-approved increases, one in 1988 and another a decade later, raised the state's cigarette tax from 10 cents a pack to 87 cents. It pulls in less than a billion dollars today.
We should hear a lot more about this in the months ahead as the state's fiscal noose tightens.
References: Opinion: Walters: Smoking tax looms as fiscal noose tightens by Dan Walters, MercuryNews.com, 8/15/2009; Lighting up a revenue idea by George Skelton Capitol Journal, Los Angeles Times, 8/13/2009.
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