No. 47
February 10, 2000
Joanna Elachi*

Proposition 28, slated for the March California ballot, allows state voters to eliminate unfair taxes and roll back further government encroachment into our homes and schools. The measure accomplishes these goals by repealing Proposition 10, narrowly approved in November 1998.

Prop. 10 placed an additional tax of $0.50 on each pack of cigarettes sold in California, and a corresponding tax on other tobacco products. Contrary to what many voters assumed, this money is not allocated for cancer research or anti-smoking campaigns. Instead, it expands intrusive social bureaucracy by setting up 58 county commissions and one state commission to oversee the implementation of experimental early childhood development programs. Dubbed the California Children and Families First Program, this network of commissions will spend almost $700 million annually to further entrench government oversight of families and schools.

The programs implemented by these new commissions and funded by the cigarette tax revenues are variations of the Healthy Families America (HFA) initiative, in which community volunteers, often with no more than a six-week training course, are given the authority to evaluate and judge the parenting skills of mothers deemed to be "at risk". These unlicensed case workers schedule weekly or monthly home visits and encourage the parents to participate in other government-funded social programs. Although these programs are experimental and initial evaluations have found them to be unsuccessful in achieving their stated goals, more and more taxpayer dollars are funneled to them.

If indeed these programs are so vital to the health of our state’s children, it seems ironic to fund them with a sin tax. If the goal of reduced smoking were to be achieved, the funding would dry up. But there is very little evidence that raising the tobacco tax reduces smoking.

Prop. 10’s additional $0.50 tax brings the total state excise tax to $0.87 per pack of cigarettes. After the federal excise tax of $0.24 is taken into account, smokers pay $1.11 per pack in excise taxes alone. This selective taxation is generally justified in two ways: that the increased cost of smoking will decrease the number of people who smoke, especially those who are underage, and that taxing smokers partially recovers the external costs of smoking (higher health costs covered by Medicaid, environmental damage, etc.). In fact, since tax increases on certain products are directly linked to expanding black markets for those products, they often make it easier for underage teens to get cigarettes. No tobacco smuggler is going to be concerned with asking for identification.

Smokers also resort to crossing state lines to acquire cheaper cigarettes. In Nevada (where the state excise tax on cigarettes is only $0.35), the Reno Gazette-Journal reported that retailers along the border saw cigarette sales boom in the months following the implementation of Prop. 10. The societal cost argument is likewise flawed.

Smokers do indeed run up higher medical expenses than non-smokers in the early years of their lives. But because of their shorter expected life spans, as a group they incur fewer medical costs and pension-related expenses in old age, such as social security and nursing home expenditures. This fact means that smokers actually save society $0.32 per pack of cigarettes, according to Kip Viscusi, a Harvard law and economics professor. This figure excludes the excise taxes that smokers alone are responsible for paying. When these taxes are taken into account, on average, smokers actually subsidize the rest of the country to the tune of $0.85 per pack. In California, that figure is $1.43.

These taxes not only discriminate against smokers as a group, but also against low-wage earners within that group. Jacob Sullum notes in his 1998 book, For Your Own Good, that "in 1990 smokers represented 19 percent of Americans earning $50,000 or more a year and about 32 percent of those earning less than $10,000. Tobacco taxes consumed 0.4 percent of the median income for smokers in the first group, versus 5.1 percent for smokers in the second group—nearly thirteen times as much."

In President Clinton’s budget proposal for 2001, he included a hike in the federal excise tax on cigarettes of an additional $0.25 per pack. This hike ignores the reality that cigarette excise taxes are ineffective deterrents, not economically justified, and discriminatory. In California they are also illogical by deeming smokers the only residents responsible for the funding of programs unrelated to smoking. Fortunately, the state’s initiative process provides redress.

California voters have eliminated unfair property taxes through Prop. 13, scrapped unjust government racial preferences through Prop. 209, rejected government takeover of health care through Prop. 186, and dumped failed bilingual education through Prop. 227. By passing Proposition 28 in March, California voters can prevent yet another layer of expensive and ineffective government intrusion and send a message that unfair taxation is not acceptable in a civil society.

For additional information, contact Naomi Lopez at (415) 989-0833.