California Vote on Cigarette Tax Hike Close

June 06, 2012

Most national attention was on the Wisconsin recall election, but California voters also went to the polls yesterday. One of their ballot initiatives, Proposition 29, would raise the state cigarette tax by $1 per pack, to $1.87. The estimated $735 million per year in additional revenue would go to new programs such as state-funded cancer research, not to reduce the existing budget gap.

Although the Secretary of State says the race remains too close to call, the measure right now is losing by about a percentage point. So even if the tax increase happens, it will be by the barest of margins.

On Monday, we noted that cigarette tax increases have been tapering off in recent years. While 14 states raised their tax in 2009, only 6 states did so in 2010 and just 3 states in 2011. Voters perhaps are sensing that a ceiling has been reached on how high cigarette tax rates should go. Key considerations include the use of taxes on tobacco users to fund general government programs and the fact that cigarette taxes are one of the most regressive ways to fund government programs (low-income earners are much more likely to be smokers).

More on cigarette taxes here.

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