Increasing Tobacco Taxes in California

By: Connie Kwong

Last Monday, a coalition of health groups including the American Heart Association, Health Access California, California Medial Association, and others filed two cigarette tax initiatives with the California Attorney General’s office. These initiatives seek to raise the cigarette tax from $0.87 to $2 per pack of cigarettes, more than doubling the current tax. Advocates declare that the initiative would generate $1.5 billion in funding for healthcare programs and services, heart and lung disease research, and other programs to prevent tobacco use, cigarette smuggling, and illegal sales. One version applies only to combustible cigarettes, and the other would also include electronic cigarettes. While the coalition will decide later between these two alternatives, the goal is to get a tobacco tax initiative on the November 2016 ballot. Although there are currently similar efforts in the California state senate to achieve similar objectives through the proposed SB 591, these initiatives go further than the legislative process because Californian voters would be able to directly vote on this issue.

While this issue goes much further than the typical discussion of whether or not it’s ethical to tax people for their behavior, it’s necessary to consider why this tax may be limited in what it can accomplish. Numerous studies find that cigarette taxes successfully create an economic disincentive to smoke, but many opponents argue that “sin taxes” unfairly burden poorer populations. Historically, the groups most vulnerable to public health threats are low-income communities, and smoking is a classic example of that. Survey findings on 2010 smoking data find that compared to 18 percent of people at or above the federal poverty level, the smoking rate is 29 percent for people below the poverty level. The difference is further magnified when considering how households with annual incomes over $150,000 have a smoking rate below 8 percent, but the smoking rate in households with income less than $20,000 is more than twice that at nearly 20 percent. It’s also more difficult for the poor to quit smoking because they often cannot afford the same health resources or medical advice that the middle-class or wealthy can take advantage of. Opponents also often point out that if the tax burden of anti-tobacco initiatives falls disproportionately on the poor, this raises concerns that it may fail to raise enough tax revenue for the health programs that many anti-smoking policies seek to fund.

What’s missing from those arguments is that the same low-income populations who are susceptible to high smoking rates are also susceptible to high rates of smoking-related illness like cancer and heart disease. This translates to high medical costs that burden the state’s public health care system, and that alone is an expensive program that costs all California taxpayers, smokers and non-smokers alike. The American Lung Association finds that in California, the annual economic cost of smoking is a whopping $18,135,550,000.

Additionally, given that tobacco taxes are regressive taxes, meaning that they take a larger percentage of income from low-income groups than high-income groups, raising them can effectively discourage those groups from smoking because it will become more difficult to afford the habit. Moreover, the positive spillover effects also go beyond just individual health. A study published in the Journal of Human Resources finds that in four states with large cigarette tax hikes, there was a corresponding decrease in smoking participation of pregnant women, reducing the likelihood of babies born with low birth-weights.

The income disparity trend among smokers versus non-smokers also has geographical implications. For instance, Marin County, one of the wealthiest counties in the state, has the lowest smoking rate at just over 7 percent. In contrast, Tehama County is one of the poorest and has the highest smoking rate at almost 23 percent. While statewide taxation efforts are a vital first step to effective anti-smoking policy, the success of these policies is ultimately contingent on city and county government efforts to target the unique balance of socioeconomic and public health problems they respectively face.

Altogether, it is essentially undisputed that smoking and other forms of tobacco use pose great threats to personal and public health. Therefore, anti-smoking policy is about well-designed policy that can indeed contribute to a healthier society, just as public health infrastructure and policies like sewage and mandatory vaccination have. But whether this issue is left to Californian voters in November 2016, or the state legislature successfully passes SB 591 before that, it’s necessary to remember that public health is hardly an issue that can only be resolved at the state level.