Proposition 99 Cigarette Tax Hike : Tobacco Industry, Doctors Battle Over Prop. 99 : Cigarette Tax Measure Becomes Burning Issue

Proposition 99 is a public health official’s dream.

By boosting the state’s cigarette tax by 25 cents a pack, it could discourage one public health problem, smoking, while making available millions of dollars to remedy another, the growing cost of providing health care to the poor.

Raising the levy from 10 cents to 35 cents would make California’s tax second only to Minnesota’s. But it would roughly compensate for inflation since 1967, when the tax was raised to a dime and represented one-third the price of a pack of cigarettes. Today, cigarettes cost an average of $1.17 a pack; one-third of that is 39 cents.

Physicians, not surprisingly, are all for Proposition 99 on the Nov. 8 ballot. So, too, are firefighters and conservationists--the former because cigarettes are a leading cause of fires, the latter because part of the money raised will be spent on new parks, to compensate in part for parks burned in tobacco-related blazes.

The tobacco industry, also not surprisingly, is aghast at anything that may hasten its already shrinking market. It is supported by several public figures who see the 250% tax hike as an attack on personal freedom, a pox on the poor, a back-door grab by tax-and-spend politicians--and, as their controversial ads claim, an invitation to every thug to get rich smuggling smokes.

Would the new tax do any of this?

Evidence from other states is mixed.

High taxes, for example, do not seem to correlate to low per-capita tobacco consumption, although statistics suggest that high prices do reduce smoking by young people and those just starting.

At the same time, smuggling--the primary objection of tax-hike opponents--has withered to a minor worry elsewhere in the nation. Most smuggling, federal researchers have found, is not done by criminals but by regular folks bringing back low-tax cigarettes from out-of-state vacations or shopping at such state-tax-free outlets as military bases.

Both the California Police Officers Assn. and the California State Sheriffs Assn. have withdrawn their early opposition to Proposition 99, and several big-city sheriffs endorse the measure.

Washington state, cited by tobacco interests in anti-Proposition 99 ads, estimates that tax cheats cut its expected cigarette-tax revenue by about 10%, mainly through banned sales of untaxed Indian allotments. But Jerry Pugnetti of the state’s Revenue Department said there is “absolutely no evidence” of smuggling by gangs or organized crime, as tobacco industry ads imply.

However, the tobacco industry is correct in asserting that the tax hike may be seen as regressive--that is, it would be more of a burden on the poor than on the middle class or the rich--because a flat tax represents a larger share of a smaller income. In addition, statistics show that poor people smoke more than people in other economic groups.

Proposition 99 backers respond that tobacco is not a necessity, adding that the health problems attributed to smoking hurt poor people far more than would the tax hike. U.S. Surgeon General C. Everett Koop, for example, reported last March that smoking now kills more people every year than alcohol, AIDS, fires, homicides, suicides, heroin and cocaine combined.

Besides, advocates argue, money generated by the greater tax would help pay for health care for the poor.

Social Costs Imposed

In addition, those urging a yes vote on Proposition 99 cite a Congressional Office of Technology Assessment study showing that smoking imposes social costs--the total cost of illness, sick days, lower productivity, fire and other effects--of perhaps $65 billion a year, or about $2.17 for every pack of cigarettes sold. Cutting that by 25 cents in California is hardly unfair, they contend.

“The tobacco companies ultimately don’t really care if smokers have to pay another quarter for a pack of cigarettes,” said Assemblyman Lloyd G. Connolly (D-Sacramento), one of the early sponsors of Proposition 99. “That’s not what is motivating them to spend $30 million” in their effort to defeat the measure.

“What’s motivating them,” he added, “is the fear that this added cost will discourage new people from starting to smoke.” Health authorities estimate that, to keep the numbers constant, 5,000 new smokers are needed every day merely to replace those who quit or die.

Regardless of the rhetoric, Proposition 99 has produced a remarkably costly and lopsided campaign. A tobacco industry-backed campaign opposing Proposition 99 disclosed Thursday that it had accepted $9.9 million in contributions and spent more than $8.1 million. That is nine times the amount raised and spent by Yes on 99 forces, who reported $1.1 million in contributions and $946,000 in expenses.

Connolly and fellow Assemblyman William J. Filante (R-Greenbrae) originally offered the Tobacco Tax Initiative, as the measure is called informally, as a bill in the Legislature last year. But prohibitive political pressure by the tobacco industry promptly persuaded them to abandon Sacramento and instead put the proposal on the ballot as an initiative.

Gathered Signatures

Helped by the medical community, they gathered more than 1 million petition signatures in a few months and the measure was on the ballot.

In addition to increasing the tax on cigarettes, the new law would impose a tax for the first time on cigars, pipe tobacco, chewing tobacco and snuff. The legislative analyst estimated that the additional taxes would generate roughly $600 million a year.

Specific spending decisions would be made by the Legislature, but the money would have to be distributed according to the following fixed percentages:

- Education: 20%, or about $120 million. This very large amount is about six times the amount now spent by the state Department of Education on programs to teach about such health problems as smoking, drug abuse, AIDS and birth defects, but is only about half the tobacco industry’s estimated advertising and promotions budget in the state.

This money would help to discourage tobacco smoking and chewing, especially by young people just starting the habit. The American Lung Assn. of California estimated that 60% of today’s smokers first lit up before their 14th birthday, 90% before they were 19.

Could Discourage the Young

Based on an earlier study of a proposed federal tax hike, the 25-cent price boost alone “could discourage as many as 100,000 children and teen-agers from using tobacco each year,” predicted a group of 22 medical and other service agencies called the Coalition for a Healthy California.

Eventually, those on both sides of the issue said, part of the education fund could find its way back to those now endorsing the initiative. Tobacco companies, through their campaign committee, Californians Against Unfair Tax Increases, also speculated that the tobacco-tax education money could let the Legislature cut existing support for schools.

“We have built in as much protection as you humanly can to prevent that,” said Jack Nicholl, director of the Yes on 99 campaign. “We join with the rest of the skeptics in our outlook on the legislative process . . . but we are here to dog it and make sure that money is allocated the way it should be.”

- Indigent health care: 35%, or $210 million, would go to hospitals and 10%, or $60 million, to physicians. The money would reimburse medical providers for the uncompensated care they give uninsured people too poor to pay their bills. The patients’ maladies need not be caused by smoking to qualify.

Critics, including the California Taxpayers Assn., contend that the measure does not clearly enough define who “cannot afford to pay.” They wonder whether it would help only the truly needy or also those with substantial assets--houses and cars and middle-class incomes--but no medical insurance.

- Health research: 5%, or $30 million. Grants would be awarded to scientists investigating the causes and possible cures of cancer, heart and lung diseases and other tobacco-related illness. This represents a tiny fraction of the $1.3 billion the federal government has budgeted for cancer research alone in 1988, according to a National Cancer Institute estimate.

- Environment: 5%, or $30 million. Funds would finance programs that enhance wildlife habitats and improve state and local parks. That sum could double the $14.3 million budgeted this year for the capital development of existing state park lands, or increase by sevenfold the Department of Fish and Game’s annual $4.28-million budget for wildlife habitat improvement.

- Reserve: 25%, or $150 million. This “unallocated account” would be distributed by the Legislature among the programs outlined above, such as cancer research, depending on the need each year. A Connolly aide, Timothy J. Howe, said most of the reserve probably would go toward indigent health care, at least at first. That would mean that up to 70% of the tax hike could go to that purpose.

Good News for Counties

That is good news to those regions of California, including Los Angeles and Orange counties, with large numbers of poor people. Currently, their essential health services are subsidized out of general county funds and are a source of concern to local officials wrestling with tight budgets.

Los Angeles County’s trauma-care network, for example, is in danger of collapsing because of the growing number of indigents unable to pay for emergency care. UC Irvine Medical Center in Orange also is staggering under the weight of the unpaid bills of uninsured patients.

Los Angeles County already has mapped out what it would like to do with its share of an increased cigarette tax. Several bills on the same topic are being prepared in Sacramento, in anticipation that the proposition will pass.

The tobacco industry has said in its television ads that increasing the tobacco tax to provide health care to the poor is a secret bid to “line the pockets” of the medical community. Health workers and elected officials dismissed that charge.

Proposition 99 opponents also said it is unfair to tap one group of people, smokers, to solve the problem of indigent health care.

‘Social Responsibility’

“Traditionally,” tobacco industry spokesman have argued, “health care for indigents has been a general social responsibility.” Since the heaviest burden falls on the poor, they argued, “the net effect would be to force the needy to underwrite their own health-care programs.”

Yes on 99 supporters respond that the proposition is designed to eventually reduce the number of people--poor and otherwise--who smoke. “And as smoking is reduced,” they said, “the overall health and economic burden of smoking to low-income groups will be reduced.”

STATE TAXES ON CIGARETTES

Here’s a comparison of state cigarette taxes expressed in cents per pack of 20. California’s present tax of 10 cents would rise to 35 cents if Proposition 99 is approved by voters.

Cents Per Pack State 2 North Carolina 2.5 Virginia 3 Kentucky 7 South Carolina 8 Wyoming 10 California (existing) 12 Georgia 13 Maryland, Missouri, Tennessee 14 Delaware 15 Arizona, New Mexico 15.5 Indiana 16 Alaska, Louisiana, Montana 16.5 Alabama 17 New Hampshire, District of Columbia, Vermont, West Virginia 18 Idaho, Mississippi, Ohio, Pennsylvania 20 Colorado, Nevada, Illinois 21 Arkansas, Michigan, New York 23 South Dakota, Oklahoma, Utah 24 Kansas, Florida 25 Rhode Island 26 Connecticut, Massachusetts, Texas 27 Oregon, New Jersey, North Dakota, Nebraska 28 Maine 30 Wisconsin, Hawaii 31 Washington 34 Iowa 35 California (proposed) 38 Minnesota

Source: U.S. Centers for Disease Control