California Considers $1.50 Cigarette Tax Hike

August 18, 2009 – SACRAMENTO — Democrats in control of California’s Legislature are looking to raise the state cigarette tax by $1.50 per pack to help raise revenue, according to a report by Legal Newsline.

But the plan could collapse if Democrats are unable to muster at least some Republican support, since California requires a two-thirds vote for tax increases, according to the report.

Grant Gillham, a veteran political consultant who’s worked tax issues nationally for the last two decades, predicted the plan would not gain support outside the Democratic caucuses in Sacramento.

“The Republicans have made it pretty clear that they and the public at large are not really interested in new taxes,” Gillham told Legal Newsline.

The proposed tobacco excise tax, supported by the American Cancer Society and other groups, would come at a bad time for many California businesses and consumers, who are already feeling the pinch of the nation’s economic downturn, Gillham said.

“This would be another brutal financial hit,” he told Legal Newsline. “We’re talking about a $1.2 billion tax increase foisted on them at the worst possible time.”

Under the tax plan, 85 percent of the revenue would be deposited into the state general fund and 15 percent into the proposed Tobacco Tax and Health Protection Fund, for tobacco control, tobacco disease research and lung cancer research.

Senate President Pro Tempore Darrell Steinberg, a Democrat from Sacramento, and Sen. Alex Padilla, a Democrat of Pacoima, are co-sponsoring the legislation to raise the cigarette tax. Proponents of their plan, outlined in Senate Bill 600, state the Golden State has one of the lowest tobacco taxes in the nation. The Washington-based Campaign for Tobacco-Free Kids said California’s tobacco tax ranks No. 32 in the country, according to Legal Newsline.

“Raising the tobacco tax could help mitigate program cuts to some of the most vulnerable Californians, but the tobacco industry is fighting our efforts to save these and other essential programs,” Padilla said in a statement.

Meanwhile, critics are pointing to a study by the nonpartisan think tank Mackinac Center for Public Policy in Michigan, which found more than one-third of the cigarettes consumed in California come from the black market.

Gillham—a consultant for Greensboro, N.C.-based Lorillard Tobacco Co.—said making a pack of smokes $1.50 more expensive would “absolutely” increase illicit cigarette trafficking into the state.

The Mackinac report estimates that already more than 36 percent of California’s cigarettes are smuggled into the state. California has not raised its tobacco tax in 11 years.


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