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Proposition 56: Cigarette Tax to Fund Healthcare, Tobacco Use Prevention, Research, and Law Enforcement. Initiative Constitutional Amendment and Statute.

The California Labor Federation supports this measure. Want to learn more? Jernetta Backus, a respiratory therapist, discusses how “Frontline Workers Are Tackling Big Tobacco With Prop 56” in California Labor’s 2016 Top Props Series. Check it out here.

vote-yes

Click here to download California Labor’s 2016 Endorsements & Ballot Measures Analyses

A YES vote on this measure means:

The tax on cigarettes and other tobacco products including e-cigarettes in California will increase by $2 a pack and revenues will be allocated as specified.

A NO vote on this measure means:

 

Official Secretary of State Ballot Summary:

  • Increases cigarette tax by $2.00 per pack, with equivalent increase on other tobacco products and electronic cigarettes containing nicotine.
  • Allocates revenues primarily to increase funding for existing healthcare programs; also for tobacco use prevention/control programs, tobacco-related disease research and law enforcement, University of California physician training, dental disease prevention programs, and administration.
  • Excludes these revenues from Proposition 98 funding requirements.
  • If tax causes decreased tobacco consumption, transfers tax revenues to offset decreases to existing tobacco-funded programs and sales tax revenues.
  • Requires biennial audit.

Background:

There are two types of excise taxes on cigarettes and tobacco in California, the cigarette tax and the cigarette/tobacco products surtax. Cigarettes are subject to both the cigarette tax and the cigarette and tobacco products surtax. The national median cigarette tax rate is $1.54 per pack. The highest state tobacco tax rate is in New York at $4.35 per pack and the lowest is Missouri at 17 cents per pack. Some states allow local cigarette taxes, but California does not. California has not raised its cigarette excise tax since 1998 and currently ranks 33rd nationally for cigarette taxes with a rate of 87 cents per pack. The Legislature and voters have adopted three tobacco tax measures since 1988:

  • Proposition 99 in 1988 imposed a cigarette and tobacco product surtax of $0.25 per pack;
  • AB 478 and AB 2055 both in 1993 that added a cigarette excise tax of $0.02 per pack; and
  • Proposition 10 in 1998 imposed an additional cigarette and tobacco product surtax of $0.50 per pack.

The Department of Public Health found that since the passage of Proposition 99 in 1988, adult smoking rates in California declined by more than 40% by 2008. By 2010, California’s adult smoking rate hit a record low with a prevalence rate of 12%. However, smoking rates vary widely among different demographic groups. In California, African-American men and women have the highest smoking rate at 21.3% and 17.1% percent respectively, followed by white men at 17.2% and Latino men at 16%. Studies also show that 90% of smokers start before the age of 21.

Every year, an estimated 443,000 people in the United States die from tobacco and smoking-related illnesses or exposure to secondhand smoke, according to the Centers for Disease Control and Prevention (CDC). Another 8.6 million people suffer from serious smoking-related illnesses. Smoking is the number one cause of preventable death in California. Since the passage of Proposition 99 in 1988, state smoking cessation programs have saved an estimated $134 billion in health care costs.

This measure would increase the state excise tax on cigarettes by $2 per pack to a total tax of $2.87 and by $2 on other tobacco products for a total state tax of $3.37 per product. The proposed increase would make California’s cigarette tax the ninth-highest in the nation. The measure changes the definition of “other tobacco products” which already includes cigars and chewing tobacco to also include electronic cigarettes that contain nicotine or liquid containing nicotine. Electronic cigarettes had not previously been subject to the existing tobacco tax, so this measure would impose the total existing tax of $3.37 on electronic cigarettes.

The measure allocates the revenues from the tax to various state entities dealing with tobacco and then mainly to increasing the reimbursement rate for Medi-Cal health care services, as well as for tobacco use and prevention programs, law enforcement and research. The measure exempts revenues from state spending limits and Prop. 98.

Legislative Analyst and Director of Finance estimate of fiscal impact: 

Net increase in excise tax revenues in the range of $1.1 billion to $1.6 billion annually by 2017-18, with revenues decreasing slightly in subsequent years. The majority of funds would be used for payments to health care providers. The remaining funds would be used for a variety of specified purposes, including tobacco-related prevention and cessation programs, law enforcement programs, medical research on tobacco-related diseases, and early childhood development programs.

Support and Opposition:

Supporters include SEIU California, the California Medical Association, Health Access, several disease-prevention groups, among others. They argue that this initiative will help dissuade people from smoking, which causes various smoking-related diseases and is the single-largest preventable cause of death—killing more people than alcohol, AIDS, car crashes, illegal drugs, murders, and suicide combined. Supporters also cite the strains that tobacco-related illness cause on the state’s health care system, which is estimated at $13.29 billion a year. They also argue that the state has a moral obligation to increase the tobacco tax because it will save lives and money by encouraging smokers to quit, and by preventing young people from becoming addicted.

Opponents include cigarette manufacturer Altria and the American Vaping Association. They argue that this initiative taxes an industry that already has declining sales, which will further decrease revenues in the various programs that currently benefit from cigarette taxes. Opponents also state that an increased tax would result in the black market profiting from counterfeit cigarettes. They also argue that Californians are already suffer from too much taxation, and this tax will disproportionately affect low-income smokers.

Prior Positions:

The Labor Federation made no recommendation on Proposition 10 in 1998 or Proposition 29 in 2012 to increase the cigarette tax. The Federation opposed Proposition 28 to repeal the Prop. 10 tobacco surcharge in 2000. In 2006, the Federation supported Proposition 86 to impose a new tax on cigarettes that failed


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