Prop 56 increases the cigarette tax by $2.00 per pack, with similar increases on other tobacco products and on electronic cigarettes containing nicotine. The revenue is allocated mainly to existing health care programs with some going to tobacco use prevention programs and tobacco-related research and law enforcement. This tax is exempted from providing some of its revenues for education spending as required by Prop 98. If tobacco use falls after this tax increase, the revenue from it will be redirected to backfill existing programs funded by earlier tobacco taxes.
In the first year, the tax would raise an additional $1 billion to $1.4 billion, which would likely taper off over time.
Proponents’ Arguments For:
Supporters of Prop 56 argue that tobacco-related health care costs Californians $3.5 billion annually and is the #1 preventable cause of death, killing 40,000 Californians annually. This is far in excess of what tobacco users themselves contribute to the health care system. Prop 56 will reduce smoking and help fund the health care costs of those who do, working like a user fee, paid for by those who benefit from it. Prop 56 is fair because you only pay if you use tobacco.
This year alone, an estimated 16,800 California youth will start smoking, one-third of whom will die from tobacco-related diseases. In every state that has significantly raised cigarette taxes, smoking rates have gone down. Prop 56 will help prevent thousands of young people from getting addicted to tobacco.
Prop 56 taxes electronic cigarettes too. Ninety percent of smokers start as teens, and teens who use e-cigarettes are twice as likely to start smoking traditional cigarettes. Taxing e-cigarettes just like tobacco products prevents our kids from getting hooked on this addictive, costly, deadly habit.
Finally, Prop 56 has built-in safeguards, audits and spending restrictions to ensure the money is spent on health care programs and not diverted by politicians for pet spending projects.
Opponents’ Arguments Against:
Opponents say Prop 56 robs California schools of funding. The state Constitution (through Proposition 98), requires that schools get at least 43% of any new tax increase, but Prop 56 exempts itself from this requirement, sending $600 million that should go to schools to health insurance companies and other wealthy special interests. None of this new tax will go to improve our kids’ schools, or to any of the other problems the state is struggling with, like crumbling roads, a drought, and violent crime. Sacramento and the budget should be focusing on those problems, not on smoking, which is already declining.
Opponents also argue that while everyone wants to help smokers quit, Prop 56 is a big tax hike that does very little to help smokers, allocating only 13% of the new money to smoking treatment and prevention. Indeed, by including a massive tax increase on vapor and e-cigarette products, which are much safer than smoking and overwhelmingly used by people to quit smoking tobacco, Prop 56 shows it does not care about smokers’ health.
Indeed, $147 million of the revenue is allowed to be spent on administration, a bureaucratic waste of money. Most of the new revenue (82%) goes to a brand new health care fund advocated by insurance companies and special interest groups to funnel the money to them. As much as $1 billion in funding from Prop 56 will go special interests for Medi-Cal services to patients they already treat. These special interests are not required to help any additional people, just line their own pockets.
The first problem with Proposition 56 is that it defies the voters’ will on education funding. Years ago Californians voted that a share of all new taxes must go to funding schools. If the legislature passed this tax, about $600 million for the revenue would go to schools. But like with so many new taxes these days, Prop 56 exempts itself from that requirement. Taxes will go up, but a smaller share of state revenue will go to schools, directly defying California voters’ desire that increases in state revenues include a significant share going to schools.
The second problem is that, while people love to tax others—especially those whose behavior they don’t approve—and not themselves, the number of smokers is dwindling precipitously, limiting the money tobacco taxes can raise—the percentage of adults in California who smoke in fell by 51.1% between 1988 and 2014, from 23.7% to 11.6%. California already has the second lowest percentage of state residents who smoke among all 50 states. So Californians have been discouraged from smoking, this tax increase is much more about a money grab than it is about reducing smoking. And with ever fewer smokers to tax, does it make any sense to keep going back to that ever drier well to try to raise new revenue?
Third, Prop 56 supporters say it would provide $1 billion or more for funding Medi-Cal health services. But so often when every time we earmark a new tax to go to some part of state spending, legislators cut a commensurate amount of funds for that area and dump it in the general fund. Then they spend that money where they want to, not where voters do. So, merely directing where this funding goes does not increase the amount spent on health care. This bait and switch happens over and over. Past tobacco taxes failed to raise total state health care spending. Even past taxes and bonds dedicated to schools have failed to raise school budgets when legislators simply cut other school funding sources.
In this case it is even worse, because Prop 56 does not specify where and how most of the new tax money is to be spend on health care. Instead, that will be decided in legislative bargaining over each year’s state budget. This means that the hospitals and insurance companies with the best lobbyists and most friends in the legislature will get the lion’s share of the funds, while the poorest health care consumers won’t even be at the bargaining table.
Finally, Prop 56 really shows it is all about the money and not about health by imposing a massive 320% tax hike on vaping and e-cigarette products. A recent report from the Royal College of Physicians concluded that vaping is “at least 95 percent safer” than smoking, that vape devices should be widely available and that doctors should encourage smokers to use them instead of smoking. Moreover, millions of people have already stopped smoking by using vape products. And where vape products are legally available, rates of cigarette smoking initiation have fallen faster than in locations where they are not available. Prop 56 will discourage one of the most effective means of reducing the harm of smoking.