Debate over hefty cigarette tax increase heats up

SACRAMENTO — Health care advocates are imploring Republican lawmakers and Gov. Arnold Schwarzenegger to rethink their opposition to taxes, especially in light of recent poll findings that show Republican voters overwhelmingly in support of increasing tobacco taxes to help solve the state’s $26.3 billion deficit.

Support for a tobacco tax increase of $1.50 per pack cuts across party lines, according to a survey done by a bipartisan polling team — the Democratic polling firm of Fairbank, Maslin, Maullin & Associates and the Republican polling firm of Public Opinion Strategies. Nearly three-quarters of all polled support a hike — including 78 percent of Democrats, 75 percent of independents, and 65 percent of Republicans.

“There is no political downside to voting for a tobacco tax increase,” said Paul Knepprath, an executive with the American Lung Association of California, which underwrote the survey along with the American Cancer Society and American Heart Association. “There is every reason why we should increase the tobacco tax: it reduces health care costs, it helps solve the budget deficit and it saves lives.”

An average pack of cigarettes costs $4.82, including an 87 cents per pack tax which hasn’t been raised since 1998, according to the state’s Department of Health. California ranks 32nd in tobacco taxes; a $1.50 increase would place California 6th highest at a $2.37 tax per pack and would push the average cost of a pack of cigarettes to $6.32.

Voters also strongly support tax increases on the wealthy (67 percent), oil companies (66 percent) and alcoholic beverages (79 percent), but they overwhelmingly preferred a tobacco tax increase over the others.

Proponents say a tobacco tax increase will prevent more than 360,000 children from starting to smoke, prevent more than 165,000 premature deaths, and will save $8.1 billion in health care costs.

A $1.50 increase would bring in $1.2 billion in revenues in the first year alone, proponents said, and more than $7 billion over the next decade.

Their entreaties seem to be falling on deaf ears. In a newly unveiled TV ad, Schwarzenegger insisted he is unwilling to solve the deficit with taxes.

“I will not sign a budget with higher taxes that cause businesses to leave and more jobs to vanish,” he said. “I’m standing firm for a balanced budget that does not raise your taxes.”

Republicans have maintained such an immovable position on taxes that Democrats have dropped even hinting at them in negotiations.

“We still think it’s a good way to go, but it’s unclear whether that would be part of a final deal,” said Jim Evans, communications director for Senate President Pro Tem Darrell Steinberg, D-Sacramento, co-author of SB600, a bill that would raise tobacco taxes by $1.50 a pack.

Tobacco firms warn that increasing cigarette taxes will lead to a surge in smuggling and a drop in revenues.

Tax increases often lead to smuggling activities and associated crimes, ranging from terrorism to armed robbery to truck hijacking, tobacco companies claim.

“It’s also a guy taking his station wagon to Nevada, filling it up with cheap cigarettes and coming back to sell them out of his garage,” said Richard Wiebe, a partner with Schubert Flint Public Affairs, which represents tobacco firm Reynolds American.

Smuggling leads to lost revenue, he said. After New Jersey raised its taxes to $2.70 a pack, for instance, revenues from the tax went down, Wiebe said.

“When any product is priced out of reach, people will look for ways to find it more cheaply,” he said. “Sales exploded on military bases when taxes went up, while retail sales went down. It shows that revenues we’re counting on for programs we’re setting up might not be there. One of the reasons California has budget problems is funding ongoing programs while revenues to support them are not there.”

Health advocates say they don’t take dire warnings from tobacco companies seriously.

“That’s all a red herring,” said Knepprath of the American Lung Association of California.

“The real issue for tobacco companies is that they’ll lose money when the price of cigarettes goes up.

“People will quit smoking, which means less consumption and their sales and profits go down.”

As the sales go down, revenues would decline by about 3 percent a year, according to the Board of Equalization. But the health care savings, Knepprath said, in lower rates of lung and heart diseases and cancer more than make up for any drop in expected revenue.

The survey, taken from June 25 to 28, had a 4.4 percentage point margin of error.

It polled 600 registered voters in California likely to cast ballots in the November 2010 general election.

source: http://www.mercurynews.com

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