NCPA - National Center for Policy Analysis


September 15, 2006

California is poised to enact the largest one-time cigarette tax hike ever -- adding $2.60 per pack -- on top of an already existing 87 cent excise tax, bringing the average price for a pack of cigarettes to $6.55, says Nanette Byrnes in BusinessWeek. 

The new measure is particularly worrisome for tobacco companies because of California's large share of the tobacco market; the state is home to 9 percent of all U.S. smokers.

In addition, cigarette makers argue that the tax is unfair, and an irresponsible spending of the public's money:

  • The measure does not require that all tax money be spent on programs to help smokers quit or on treating smoker's illnesses.
  • It needlessly includes an antitrust exemption for hospital companies.
  • It will only lead to increases in untaxed counterfeits and buying from other states will hurt sales, undermining the tobacco tax revenue.

Despite the tobacco industry's efforts, many expect the mandate to pass easily.  But that will not end the fight, says Byrnes.  Other states are generating similar proposals:

  • In Missouri, there is a court battle to get a measure that would increase taxes by 80 cents per pack on the November ballot.
  • Several candidates running for office in Maryland, and some already in power, are pushing for a $1 per pack increase. 

Source: Nanette Byrnes, "Big Tobacco's Showdown in the West," NewsWeek, September 11, 2006.


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