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California May Hike Cigarette Tax by $2 to Increase Healthcare Spending

3 min readBy: Gerald Prante

California wants to expand government-provided healthcare. So how do you raise the revenue? Of course, you do what is politically expedient and raise taxes on a politicial minority, that being smokers. From the San Jose Mercury News:

Democratic leaders on Monday agreed to key elements of Gov. Arnold Schwarzenegger’s health care reform plan, including mandatory insurance, according to a spokesman for Assembly Speaker Fabian Nunez.

They embraced the idea while demanding some exemptions for people who are in financial trouble. Public programs also would expand to cover families earning up to 300 percent of the federal poverty level-about $62,000 a year for a family of four.

Democrats also lowered the minimum amount employers must spend from their previous health care bill, which Schwarzenegger vetoed.

The new plan has a sliding scale for employers, with a maximum contribution of 6.5 percent of payroll. Steve Maviglio, a spokesman for Nunez, D-Los Angeles, said the Democratic plan also raises the tobacco taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. by $2 a pack and imposes a tax on hospitals.

Schwarzenegger and the Democrats have only a few weeks to achieve a compromise and still have enough time to get a health reform measure on the November 2008 ballot.

“This is clearly positive movement,” Schwarzenegger spokesman Aaron McLear said. “We look forward to seeing details of the proposal, but understand there are still issues to be resolved.”

Raising revenue on the backs of smokers is terrible tax policy. The excuse is typically that it’s just political expediency, which is unfortunate in a supposedly free society that is supposed to keep the majority in check. If the cigarette tax is too low to begin with in terms of its not compensating for the negative costs smoking imposes on society, then it should be raised regardless of the need to pay for some other program. If the argument is that people should stop smoking, then why not ban smoking? Of course politicians won’t do that because then they wouldn’t be able to raise any revenue from it.

Here’s a question that should be asked to all the anti-smoking groups out there that advocate higher cigarette taxes around every corner: What would the cigarette tax rate be in your ideal world? And we’ll ask the same question to the politicians who constantly advocate these tax hikes on cigarettes. What should the rate be? (It would be interesting to see how these answers diverge because right now these two parties work hand-in-hand as the politicians really only care about raising revenue, while the paternalist anti-smoking groups just use that revenue argument to persuade the public to support a tax policy that has some goodie spending program attached to it when in reality they just want people to quit.)

Finally, Governor Schwarzenegger’s move to embrace these policies that expand the reach of government makes one wonder what the then-actor was saying in this 1990 “Free to Choose” video.

“Being free to choose for me means being free to make your own decisions, free to live your own life, pursue your own goals, chase your own rainbow…without the government breathing down on your neck or standing on your shoes.”

I guess raising taxes on cigarettes and imposing big payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. es on workers and businesses sounds a lot like “being free to live your own life…without the government standing on your shoes” to the governor.