Tobacco-tax increase on California ballot, but it can't help solve budget crisis

In the past decade, red and blue states alike have approved more than 100 tobacco tax increases in a desperate hunt for budget revenues. But not one has passed in California, whose 87-cent cigarette tax dropped from third-highest in the nation in 1999 to 33rd today despite the state's ongoing budget problems. That confounds health advocates, who otherwise consider California to be a trailblazer when it comes to bans on smoking in bars and restaurants, and public campaigns urging tobacco users to quit. But longtime state budget watchers are hardly surprised.

They largely blame the state's supermajority requirement to pass tax increases in the Legislature. That forces tobacco tax proposals to the ballot, where industry can spend unlimited sums to defeat them. "Certainly the state has been looking in every place possible for new sources of revenues," said Mark Baldassare, president and CEO of the Public Policy Institute of California. "Most other places have a simple majority, and I think a two-thirds majority is a hurdle even for something seemingly as popular as a tobacco tax."

 The June ballot in California includes Proposition 29, a tobacco tax that would raise $735 million in its first full yearm mostly for cancer and disease research. The Legislature could not tap the funds for 15 years, and even then not without meeting certain requirements. The initiative has generated much of its support and opposition along predictable political lines, with Republicans and anti-tax groups opposed and Democrats and health organizations in support. Tobacco firms R.J. Reynolds and Philip Morris have contributed more than $38 million against the measure. An early PPIC poll showed 67 percent of likely voters in support in March, but backers believe it will ultimately be a close contest under the weight of heavy industry opposition. Baldassare observed that support for tobacco taxes "fits the tax-the-other-person mentality."

 The state Department of Public Health said last year that the adult smoking rate dropped to 11.9 percent, compared with 27.7 percent in 1985. As Gov. Jerry Brown prepares to release a revised budget reflecting a deficit that has ballooned to $16 billion from the original $9.2 billion estimate, Proposition 29 opponents have seized on a budgetary argument to make their case. The No on 29 campaign states on its website, "Billions in New Taxes, but Nothing to Fix the State Budget." It also points out that funds would not go to schools, unlike other general fund revenues. Proponents have dismissed the argument, saying it is beside the point and disingenuous, coming from opponents to other state tax increases for education.

 "This measure is not going to solve the state budget crisis," said Jim Knox of the American Cancer Society. "It is not a cure for global warming. There are a lot of things it doesn't do. This measure is intended to raise the tobacco tax to protect kids from smoking." Still, the budgetary argument has won sympathy in some unexpected places. The Los Angeles Times editorial board opposed the initiative on grounds that cancer research is not a priority during the budget crisis, even though it praised the health benefits that could result from a $1-per-pack increase in cigarette taxes. 

The left-leaning California Budget Project, which has not taken a position, concluded in a policy paper, "A key policy issue raised by Proposition 29 is whether it is desirable to dedicate hard-to-raise new revenues to a specific set of programs that would be 'locked in,' limiting the ability of the Legislature to make changes in response to shifting economic, budget and demographic trends." Democrats and health advocates acknowledge the severity of the state's fiscal needs, but maintain that California probably will never pass a tobacco-tax increase for general budget purposes. Given that political reality, they say, it is worth passing Proposition 29 because a higher tax would reduce smoking. Tobacco companies hold sway in the Capitol.

They have been reliable supporters of the California Republican Party and its legislators, and have also donated to some influential Democrats, records show. Altria Group donated $10,000 and R.J. Reynolds gave $5,000 to the legal defense fund of Democratic state Sen. Rod Wright, chairman of the Senate committee that oversees tobacco-related bills. Since the recession in 2008, nearly two dozen other states have raised tobacco taxes to help balance their books. A Public Policy Institute of California poll in March found that 63 percent of likely voters say they favor higher tobacco taxes for that purpose. Yet most of California's 87-cent excise tax on cigarettes goes for programs other than the state's general fund.

The most recent tax increase, 1998's Proposition 10, devotes 50 cents per pack to First 5 early childhood development programs. Political experts say voters will not support tax increases that support the general fund because they do not trust lawmakers to spend the money. That leads to ballot initiatives that have a defined spending purpose outside the Legislature's reach and typically for a pet cause of the funder. "You can't do a tax for the general fund on the ballot," said Lenny Goldberg, lobbyist for the left-leaning California Tax Reform Association. "Nobody will go out and argue for it. The other side of it is, the public in the polling we've seen will vote for a tax only if they know where it's going."