Tobacco Seller to Challenge New Tax : Distributor Will Attack It on Constitutional Grounds

A Glendale tobacco distributor is preparing to file the first lawsuit challenging the constitutionality of the voter-approved cigarette tax increase.

Robert Kennedy Jr., president of Kennedy Wholesale Inc., said the company will maintain in its court action that the initiative measure, Proposition 99, should be declared invalid because it violates constitutional guidelines for taxing and spending in California.

The initiative, approved by 57% of the voters in November, raises cigarette taxes by 25 cents a pack and directs that revenue from the increase be funneled into new programs that reduce the effect of tobacco use in California and protect the state’s natural resources.

As a formality to pave the way for filing a lawsuit, Kennedy said the company is seeking a refund from the Board of Equalization of the $49,743 in new taxes that it paid on Jan. 3.

Kennedy said the board is sure to deny the request. He said it was made “to allow us to seek judicial review of the constitutionality of the new taxes on cigarettes and other tobacco products as soon as possible.”

State officials expect to collect $925 million over the next 18 months as a result of the tobacco tax increases. Gov. George Deukmejian has already made plans to distribute the money to the University of California, the Department of Health Services, the Department of Corrections and a number of other state agencies for a variety of programs.

In a letter to the Board of Equalization, Kennedy said the company believes that the tax is unconstitutional because it was not approved by a two-thirds vote of the Legislature, it appropriates funds “to a particular purpose in perpetuity” and it encompasses more than one subject by requiring expenditures for programs that are not “tobacco-related.”

The lawsuit is expected to be filed Jan. 15. Betsy Hite, a spokesman for the Coalition for a Healthy California, a group of nonprofit associations that authored and promoted the initiative, said her organization will seek to join Atty. Gen. John K. Van de Kamp in defending the initiative.

“(The lawsuit) is just another ploy,” she said. “The industry will not admit the fact that the voters have spoken. Clearly, Proposition 99 was a referendum against smoking, and the industry and the public wants an increase in the tax. The industry has already spent $25 million, and now they will spend whatever they can.”

Hite said she was referring to the $25 million the industry spent trying to defeat the proposition. The industry also attempted to stop the initiative during the campaign with a lawsuit citing the requirement in the state Constitution for money-related initiatives to embrace only one subject. The courts ruled that the lawsuit was premature and should not be filed until after the voters had spoken.

Hite said the coalition will take the position that the two-thirds vote requirement, imposed by Proposition 13, applies only to property taxes. Proposition 13, approved by voters in 1978, cut property taxes and required a two-thirds vote of the Legislature before they could be raised.