Proposition 29: Imposes $1 additional tax on each pack of cigarettes

This proposition seeks to raise the taxes on cigarette sales from $1.88 ($1 of which goes to the federal government) to $2.88 per pack of cigarette (and automatic corresponding raises in tax on other tobacco products).  The money is earmarked for cancer and tobacco-related disease research and prevention programs, law enforcement, and the creation of an administrative bureaucracy to oversee distributions.  Overall, Politomuse feels this initiative presents a solution searching for a problem and for that reason we urge a no vote.

It is hard to argue in favor of cigarette smokers and even more distasteful to find oneself siding with “big tobacco.”  Unfortunately, we feel that is what the proponents of this initiative are counting on.   This measure raises funds to be funneled into a newly created government entity called the California Cancer Research Life Sciences Innovation Trust Fund (CCRLS).  The CCRLS then has five subsidiary funds (see voter guide pp. 14-15) that set forth percentage allocations for monies into various types of tobacco related disease (1) research, (2) research facilities, and (3) prevention as well as two smaller funds for (4) administration and (5) law enforcement .  The individual funds then allocate the monies to different research entities.   A newly formed committee consisting of nine individuals 4 of which are appointed by the Governor, three of which are UC Chancellors, and two of which are appointed by the director of the Department for Public Health.  The Committee decides how monies are distributed out of the five funds (consistent with their stated objectives). 

The Opposition to this proposition correctly states that no money from this initiative would go to treat cancer patients.  While that is true, we think it misses the point.   The problem with this initiative is that it isn’t really focused on addressing a particular issue.  It does not funnel money into public health care, treatment or even research.  Instead, it appears to create something of a slush-fund for a few very distinct groups who are obviously keenly interested in passing the measure.  Tracing the money and the CCRLS committee membership is telling.  First, only 20% of funds go to an established public health system (the Department of Public health’s smoking cessation programs).  5% of funds oddly go to law enforcement – something us cynical politomuses suspect might be more of an effort to curry political support than anything related to curing cancer.  The remaining 75% of funds go to various grants and loans that the CCRLS committee will dole out – back into the industry from whence the committee members came.  Moreover, after the research institutions (some of which are likely to be affiliated with the UC entities’ chancellors that are sitting on the committee) receive their anticipated several hundred million dollars, this initiate does not have any provision requiring transferring or even sharing any intellectual property rights stemming from any discoveries.   In short, this money is truly intended to be a gift, not an investment. 

The total tax load on cigarette packs if this measure passes would be around 50% of the total cost to consumers ($5 current average cost per pack of cigarettes and assumed $6 average cost with increase based on Legislative Analyst data).  While we generally approve of “sin taxes,” because they use the negative aspect of taxation as an intentional disincentive to conduct that which society wishes to discourage, we are uncomfortable with a nearly 50% tax rate on this particular product that funnels money toward a pre-set body of special interests with no real indication that the money is being directed toward the area of greatest need.  If these funds were instead directed toward funding existing underfunded medical programs at the state or federal level we would probably support it.  But this initiative instead strikes us as a prototypical special interest group seeking to funnel money away from a disfavored class of people (smokers) into the pockets of a particular group.  We do not think that is good policy.  We would urge voters to vote down this initiative that would force a group of consumers to “donate” money to these worthy causes and instead direct their positive inclination to help those suffering from cancer inward and themselves donate to one of these top-rated charities:  http://www.bcrfcure.org/ , http://www.cancerresearch.org/, http://bcconnections.org/, or any of hundreds of others.

Weak NO

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  1. #1 by warero on May 25, 2012 - 10:49 pm

    Reblogged this on Selion Management.

  2. #2 by Jaime on May 26, 2012 - 2:33 pm

    This one is seriously killing me…I really don’t know how to vote-I get your points, but I’m leaning yes….

    I get the ballot-box budgeting and am generally opposed and usually default no, but when you increase cig prices it means less kids will start smoking as that is the biggest deterrent, to both point of entry and sustained use; and as a health care provider that is a BIG deal. The budgeting numbers are a little murky–from reading the guide it looks like 60% will go toward cancer research-not treatment, but research. Whether that is in CA or not, who cares? Slush funds abound and with politicians beholden to the special interests, I don’t think it’s changing any time soon.

    And, with big tobacco throwing so much $$ to defeat this prop, I’m almost likely to vote for it because I deplore their marketing and practices (not to mention their cover ups and shady “research” and ads)…

    UGH!!!

    • #3 by politoesq on May 26, 2012 - 5:40 pm

      Thanks for your great points Jaime. I agree with you that despite pouring a reported $40 million into the “No” campaign the opposition (read “big tobacco”) has failed to provide much of a reason to vote against this initiative. But I do think the poor use of the monies provides a rational reason to oppose. I’d also point out, as we insinuated in the post, that the “yes” campaign here is also a bit “dirty” in my mind. The creation of a multi-hundred million dollar slush fund, complete with payoffs (in the form of financial incentives) to potential political allies (the small law enforcement fund and the Health Department fund) in the name of curing cancer isn’t exactly an above-board practice either.

      THE SIN TAX: Much like your “bury the money in a hole” idea, a wise person asked me if it wouldn’t be just as useful to burn the money. In weighing this measure we struggled with the same issue which I will re-cast as: “It’s a sin tax isn’t that good enough? To which I respond, although it’s a close call, I’d have to say no. I have little compassion for tobacco companies, even less for marketing agencies that push the deadly product, but I do think I should have some compassion for the users of their product. While those poor folks did make a poor decision in starting to smoke, as continuing consumers they are addicts. So, while I don’t mind making Tobacco companies into a piñata and smacking them around, I don’t feel comfortable doing that to the consumers.

      Additionally, while I like the economic disincentive that this tax creates, I need to be realistic about that disincentive. Does making the $5 pack of cigarettes cost $6 really stop people from smoking? Economists will say that from a macro standpoint the answer is “yes” as to SOME people. I would say that the 20% price increase is unlikely to unilaterally bring about such change as to MOST people. Additionally, like any “use tax” I don’t really like the fact that the burden imposed by the tax disproportionately hurts lower-income consumers (because they have less disposable income [income over and above that necessary for food and shelter]). To my thinking, if as a society we decide to take that step (reducing the disposable income of those who can’t afford it), we should do it in a responsible manner. We should not take their money and burn it or bury it in a hole solely to “teach them a lesson” about smoking. We should take the money and put it to its best constructive use.

      IF ITS NOT PERFECT DON’T APPROVE IT: I would also urge you to reject the false dichotomy presented by this initiative. Just because we don’t like the creation of a “slush fund” in this initiative doesn’t mean we can’t vote to increase taxes on cigarettes in the future. To the contrary my guess would be that you will see many more such initiatives in the future. Maybe some of those will put the money into the deficit-ladened general fund or into the money-hobbled Health Department budget. That we’d support, even if it still disproportionately affected the poor, because we’d feel the money would be used in a more responsible manner — to solve an actual, existing problem.

      • #4 by Jaime on May 28, 2012 - 10:29 pm

        ahh…but nothing in politics is perfect, so to wait for a “perfect” proposition, candidate, way the $$ is spent, etc., seems unrealistic. The arguments against that you make are the very ones that the tobacco companies are making and it is the way the “republican” guide sheet says to vote as well. While the banter is helpful in narrowing down the punch list of what I like and don’t like about the proposition, I still don’t have an answer and my ballot sits, still unopened.

  3. #5 by Jaime on May 26, 2012 - 2:52 pm

    One more thought: I’m not sure if I would care if the extra $1’s would be buried in a big hole in the ground… 🙂

  4. #6 by Jesse on May 26, 2012 - 9:47 pm

    Thanks for your detailed reply. It seems that one of your main arguments against the sin tax is that an extra $1 probably will not actually reduce smoking very much. If you do a Google search for “cigarette tax reduce smoking”, you can find the results of various investigations of this. For example:

    “Tobacco tax increases are one of the most effective ways to reduce smoking and other tobacco use, especially among kids. Every 10 percent increase in cigarette prices reduces youth smoking by about seven percent and total cigarette consumption by about four percent.” (From http://www.tobaccofreekids.org/what_we_do/state_local/taxes/)

    Assuming that these are not too far from the correct values, it appears that a 20% increase in the price of cigarettes will in fact save a lot of kids from starting the habit, and thus over time millions will be saved from lung cancer.

    You say that you don’t mind if a sin tax hurts big tobacco, but you don’t want it hurting those currently smoking. But we have to balance that against those who will never start smoking thanks to this tax. The number of pre-additional-$1-tax existing smokers that will be hurt is fixed. But the number of post-additional-$1-tax never-to-be-smokers that are helped by this tax could be quite large, since it is the product of the number who end up not smoking each year and the number of years for which the new tax remains in effect. If you imagine that the new tax will remain in effect “forever”, I think the benefits to people in the future easily outweigh the costs to those who started smoking in the past. Note also that some fraction of existing smokers will be helped, not hurt, by this tax, since, if we believe the numbers above, a 10% tax would cause 4% of them to quit.

    You also say that it is ok to say “no” to this tax now because we can say “yes” later to a properly-written initiative. But how many more years will we have to wait for that? And how many children will start smoking during those years?

    • #7 by politoesq on May 28, 2012 - 4:11 pm

      Good comments Jesse. I think you have the right issues spotted. Now it is just a manner of weighing them against your values. Nevertheless, here are a few short points to keep in mind:

      (1) Be careful about accepting statistics and numbers from anti-smoking groups. We find that they have become almost (but not quite) as bad as big tobacco at misusing statistical information. By way of example, the group you cite to are frequently re-cited by various groups as being applicable to a wide range of geographies and consumers, but we haven’t been able to trace their precise original source. The closest we came was to a 2000 study out of Amsterdam quoted by an African group, (see – see fn. 2). That source is unlikely to be predictive of the scenario in relatively wealthy California, over a decade later. I raise this only because, as we said in the original post, I think it is a given that statistically higher prices equate to reduced consumption — that’s basic economics. But I think the marginal change is a different, and much murkier, issue. It is akin to the argument you frequently hear about taxes. Reducing the tax rate from 80% to 35% will generate a given effect because of the dramatic change in disposable income felt by those accustomed to paying an 80% tax rate. But reducing the rate from 36% to 35% is unlikely to generate a proportionate response because the change is much smaller. Consumer psychology just doesn’t react the same to a big difference in either price or resource availability as it does to a small differences. We agree that $1 increase in cigarette costs will make a difference in consumer decision-making, but we think it will be minor.

      (2) How long will we have to wait for another cigarette tax? If past performance is any indication, probably not very long. Smokers are an easy target group from which to extract money. Expect more of these types of proposals in the near future.

  5. #8 by Jaime on May 28, 2012 - 10:57 pm

    In the interest of full disclosure, I am passionate about issues surrounding smoking because my father died in his 50’s from a smoking related illness and I spent most of my early childhood years trying to convince many family members to quit. I deplore big tobacco and all it represents-so it is somewhat difficult to be objective, try as I might.

    The other point that I didn’t respond to was the disproportionate way that a tax hits the poor-I have to say that from working with both a very poor population at a community non profit clinic for the past decade, as well as a more affluent clinic with mostly insured patients, there is a disproportionate burden on the poor patients who smoke and want to quit smoking. They are already singled out and paying more-it’s just not as obvious. They generally can’t afford welbutrin or months and months of step down nicorette therapy to quit-and they can’t afford the high costs of their diabetic and hypertension meds, hospital bills for their children’s asthma and repeated ear infections, cancers and lung disease which are all caused or exacerbated by smoking or exposure to second hand smoke. What about the health effects of smoking and the decrease in costs to the poor and society in general if more people stopped or never started? Is it worth it yet?

    • #9 by politomaven on May 29, 2012 - 10:16 pm

      “I never … believed there was one code of morality for a public and another for a private man.”

      — Thomas Jefferson, In a letter to Don Valentine de Feronda, 1809

      Admittedly, we at PolitoMuse never pass up an opportunity to quote Thomas Jefferson, but in this instance the quote happens to be relevant to your comment Jaime. Voting is deeply personal and often touches on our individual experiences. Like so many public issues, taxation of tobacco has both advantages and drawbacks. One factor in our decision to vote “No” on this proposition is our opposition to the initiative process. To beat the perils of direct democracy drum, we believe this process asks voters to rule on significat policies with minimal information and attempts to rationalize precious state resources without context of the bigger California fiscal needs. So, when the special interests that draft these initiatives don’t get it “exactly right” we tend to urge voters to reject their agenda and send them back to the drawing board. Since the initiative process allows for no “caucusing” we feel that is the only proper response. Finally, we would respectfully submit that a vote against this proposition, is NOT a vote in support of the tobacco industry. Its just a vote to maintain the status quo until a better sin tax is proposed… probably in a few months…

      That said, there is no single right answer on policies as complex as those put forward in Proposition 29. However, we are inspired to see the care and consideration you give to your vote. That level of attention and care is most definitely the “right” policy.

      I’ll leave you with a quote widely attributed to Benjamin Franklin. As you see, even Ben understood that voting is a complex process –

      “Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote!”

      n.b. — Many scholars questions whether this quote has been properly attributed to Franklin as the language does not seem to match the time period… So there you go, voters can’t even agree on that! — ed.

  6. #10 by Jaime on October 5, 2012 - 8:28 pm

    Hey guys, where is that sin tax on cigs since we voted down 29?? I thought I would be seeing it again, instead we have regurgitated the auto insurance bs….ugh! i’m becoming disillusioned…

  7. #11 by politoesq on October 6, 2012 - 3:52 pm

    Sorry Jaime, no cig sin tax this time around – but rest asured, you’ll see it again. Of course, you could always take matters into your own hands. Write a simple proposition that provides a straight “sin” tax on cigs and puts the money straight into the general fund and get it qualified for the ballot. We might even overcome our anti-proposition prejudice and support it!

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