Overcoming an expensive and bitter campaign by the tobacco industry and persuading voters to approve Proposition 99 was only the first hurdle for California’s medical community, which sponsored the tobacco tax initiative.
Now comes the really hard part: negotiating the Legislature’s special-interest steeplechase to make sure that the estimated $600 million to be raised annually by the tobacco tax increase is allocated as the sponsors intended and spent as they promised voters it would be spent.
“There is still a lot of work to do,” said Dr. Spencer Koerner of the California Thoracic Society, one of the initiative’s 22 co-sponsors who banded together as the Coalition for a Healthy California. “The money raised by this (measure) must be allocated by the Legislature. We’d like to keep the coalition together to work with the Legislature to make sure it is properly allocated.”
At the same time, voter approval of the 25-cents-a-pack cigarette tax hike has created a lot of work for both the State Board of Equalization and cigarette wholesalers.
The board, which collects sales and other taxes for the state, has less than two months to implement the cigarette tax hike and to decide how to calculate a new, “equivalent” tax on cigars, pipe tobacco, snuff and other tobacco products never before taxed by the state.
Cigarette dealers, meanwhile, are trying to gauge whether there will be a run on existing supplies of low-tax cigarettes in the coming weeks if some thrifty California smokers decide to hoard a personal stock before the $2.50-a-carton tax increase takes effect New Year’s Day.
Proposition 99, which was approved 57.8% to 42.2%, designates most of the money from an expanded tobacco tax, at least 45%, to pay health care costs of uninsured poor people. Another 20% will finance greatly expanded anti-smoking education programs; 5% will be spent researching tobacco-related diseases, and 5% on improving parks. The remaining 25% will be allocated by the Legislature among those programs as needed.
The Legislature will also define specific funding within each of the major categories, which is why the American Cancer Society, the American Heart Assn., the American Lung Assn. and other members of the Coalition for a Healthy California are concentrating on drafting legislation.
$1.6 Million a Day
When the tax hike takes effect, it is expected to dump $1.6 million a day into the state treasury.
But the medical community is worried that the new money could do harm as well as good.
For example, could the new revenue encourage cuts in state-financed Medi-Cal insurance for the poor? What happens to indigent care if, as promised, the higher tax leads to fewer smokers--and, thus, less revenue?
“You can bet the people who put this together will watch over the backs of the Legislature to make sure that (the money raised) is used properly,” said Los Angeles County Supervisor Ed Edelman, a Proposition 99 supporter.
Edelman said Los Angeles County expects $41 million a year from the added tax, which will be used to keep open County Harbor-UCLA Medical Center in Torrance and Rancho de los Amigos Hospital in Downey, as well as to forestall cutbacks in other medical and non-medical county services.
Koerner discounted concerns about programs that become dependent on revenue from the tax, which is designed to shrink as smokers are encouraged to quit and youngsters are discouraged from starting.
“We’ll eliminate the tax” through the disincentives attached to it, he said, “but then we won’t need it because there will be no tobacco-related diseases. That’s the beauty of it.”
Meanwhile, the State Board of Equalization at its Nov. 30 meeting will try to draft two emergency regulations clearing up points in the initiative--a deadline for collecting the higher tax rate on unsold cigarette inventories already taxed at the old rate and how to set new tax rates for tobacco products other than cigarettes.
Del Anderson, excise tax administrator for the board, said the board will also have to set up a program for checking how well cigarette dealers are complying with the higher tax.
Funds for Enforcement
The proposition sets aside several hundred thousand dollars a year to enforce the tax hike, and Anderson said the state could hire as many as seven new tax inspectors to crack down on violators.
“We don’t really think that is going to be a problem,” he added. “If we detect there is a lot of it (tax evasion) going on, we will have to ask for a bigger (staff) increase. But we don’t anticipate that happening.”