A liberal billionaire and high-profile Democratic donor is promising to spend millions to change Californians’ minds about taxes on tobacco and electronic cigarettes.
Tom Steyer, the California-based hedge fund manager known for spending huge sums of money to support progressive causes, announced this week his plan to spend $1 million backing a proposed ballot initiative that would raise California’s tobacco tax by $2. The ballot initiative would also extend tobacco taxes to electronic cigarettes.
E-cigarettes aren’t sold “by the pack,” but vapers would end up paying an excise fee of about 70 percent on e-cigarette devices and vaping cartridges.
Californians have previously rejected other attempts to raise taxes on cigarettes, but Steyer says it’s time for that to change.
“You can’t sugar-coat it, smoking is deadly,” Steyer told the Los Angeles Times. “This initiative aims to save lives and stop teens from ever picking up the deadly tobacco habit in the first place.”
But it’s also going to generate a lot of money for state government. The $2-per-pack tax would transfer more than $1.5 billion annually from the wallets of California smokers to the government coffers in Sacramento.
In a state known for high taxes, California’s tax on cigarettes is a modest 87 cents per pack. That’s less than 32 other states charge, and California hasn’t increased its cigarette taxes since 1998.
State cigarette taxes are piled on top of a $1.01 per-pack federal tax.
Despite the low taxes, California has fewer smokers than the nation as a whole. A 2015 state government report said 11.7 percent of Californians smoke, compared to about 18 percent of Americans.
If Steyer and his friends are successful in getting a higher tobacco tax on the ballot this year, California voters will get to weigh in on the issue for the third time in a decade.
In 2006, a ballot initiative that would have increased the tax to $2.80 per pack turned into a multi-million-dollar electoral battle. Advocates for the higher tax spent more than $14 million to push the idea, while the tobacco industry spent more than $60 million in opposition, according to one tally of the campaign.
In the end, the state’s voters decided they didn’t want to pay higher taxes. More than 4.4 million votes (51.7 percent) were cast against the proposal, sending it to a narrow defeat.
That proposal would have generated an estimated $2.2 billion in annual revenue, but only about 10 percent of that total would have been spent on anti-smoking measures.
In 2012, another ballot measure would have increased the cigarette tax by $1 per pack, but voters rejected that idea too.
Advocates for the higher taxes believe they can change Californians’ minds this time around. That, or they hope the last decade — which has seen dwindling smoking rates in the state and nationally, along with a rise in tobacco taxes and more restrictive rules for smoking in public — has sufficiently turned the public against smokers.
“After two decades of inaction by California legislators we really need voters to take this into their own hands,” Lori Bremner, grassroots director of the American Cancer Society Cancer Action Network, told the Los Angeles Times.
But voters don’t seem to be in much of a rush.
This is already the third effort to get a higher cigarette tax on the 2016 ballot in California. Two previous proposals failed to get enough signatures before the first ballot deadline in mid-January, causing Steyer to step-in and lend a hand.
Cigarette taxes will figure heavily in state budgets and state-level elections this year, not only in California.
According to Americans For Tax Reform, a Washington, D.C., based group which opposes higher taxes, legislation to raise taxes on e-cigarettes has already been filed in Alaska, Hawaii, Iowa, Kentucky, New Jersey, New Mexico, New York, Virginia, Washington and West Virginia, along with the ballot initiative in California.
Every increase in price for e-cigarettes, the group warns, makes it less likely that smokers will switch to vaping, a less harmful way to get a nicotine fix.