New Tobacco Tax in California

On November 8th, voters in California voted to increase sales tax on cigarettes by $2.00. This measure, Proposition 56, passed overwhelmingly with a 64.3% yes vote to a 35.7% no vote, nearly two to one. Prop 56 did not change the allocation of the existing $.87 tax which goes towards the General Fund, tobacco prevention, breast cancer screenings and research, healthcare services for low-income individuals, environmental protection and early childhood development programs. It did, however, create additional tax revenue which is intended to go towards extra programs such as physician training, prevention and treatment of dental diseases, Medi-Cal, tobacco-use prevention, research into cancer, heart and lung diseases, and other tobacco-related diseases, as well as school programs focusing on tobacco-use prevention and reduction.

Previously, taxes on a pack of cigarettes were around $.87, now they are up to $2.87. So what does this mean for the consumer? Obviously a higher price (and significantly so) on a pack of cigarettes should deter people from smoking as much. Quite understandably that is the goal in mind. Backers of the measure, including the American Lung Association and American Cancer Society, hope this will hit consumers hard enough in the wallet that they quit if not at least cut back. Another similar core objective is to price cigarettes completely out of young peoples’ budgets, hoping to prevent them from smoking at all in the first place.

Being a resident of the cigarette-friendly state of Virginia but having spent a good bit of time in New York City over the past few years, I’ve seen the cost of cigarettes climb quite steadily in the big apple compared to my home state. New York state cigarette tax is currently at $4.35 per pack (the highest in the country) with NYC adding on an additional $1.50, bringing the total taxes on a pack of cigarettes up to $5.85 in the city. In Virginia, costs have stayed about the same since I’ve been a smoker – about $6.50/pack for my brand. When I find myself in the city, however, I see that same pack cost $13-$14 (depending on the bodega). Fortunately, I usually remember to bring my pack, but whenever I don’t I know I’m hard-pressed to push myself to spend that extra cash. Certainly if I lived in NYC I’d have to consider cutting back, rather than spending the $90-$100/week to fuel a pack-a-day habit. Residents apparently feel the same way, because in the past 12 years adult smoking rates in the city have gone from 22% down to 13%.

Those numbers typically translate across the country as well. Studies from the US Surgeon General show that for every 10% increase on the price of cigarettes, smoking goes down 4%. Californians already have the second lowest smoking rate in the country, coming in around 12% after Utah’s 9.3%. California also used to have one of the lowest cigarette taxes in the country when it was $.87/pack; now at $2.87 they are in the top ten (ninth in fact).

It’s hard to say whether that 4% per 10% formula will translate into the existing low-smoke culture, but I think it is easy to say that they are largely unified in making this radical change and curbing what most everyone agrees is a bad habit.