Justices Declare Tobacco Tax Constitutional

The state Supreme Court, giving broad approval to the use of initiatives to increase taxes, on Monday upheld the constitutionality of Proposition 99, the tobacco tax hike passed in the November, 1988, election.

The justices unanimously rejected claims by a tobacco firm that the measure violated a provision of Proposition 13, the tax-cutting initiative adopted in 1978, that required “any” new state tax to be approved by two-thirds of the Legislature.

The court, in an opinion by Justice Edward A. Panelli, acknowledged that the 1978 provision was ambiguous. But the justices said there was no conclusive evidence that the voters, while limiting lawmakers’ authority, had intended to restrict their own power to raise taxes by statutory initiative. Such an action by the voters would have “made no sense,” Panelli wrote.

The justices also turned down the contention that, in apportioning revenue for a broad assortment of health, medical and environmental programs, Proposition 99 violated a state constitutional rule limiting initiatives to one subject.

One court member, however, raised concern that the court’s ruling could open the way for initiatives that would decrease taxes.

Justice Stanley Mosk noted in a concurring opinion that it is possible now that an initiative could be passed to repeal state income, sales and related taxes. “The adoption of such a measure would render state government virtually impotent,” he warned.

George Waters of Sacramento, a lawyer for sponsors of the tobacco tax measure, said the ruling opens the way for the continued collection of more than $500 million annually for health and other programs.

Waters pointed out that Proposition 99 was the first tax increase passed in the 80-year history of the initiative process and expressed doubt such measures would become routine. “People vote with their pocketbooks,” he said. “This was a rare situation where people were aware of the enormous impact and health consequences of tobacco use.”

An attorney for the tobacco firm challenging the initiative could not be reached for comment.

Backed by medical, health and environmental groups, Proposition 99 was passed by 58% of the electorate. The measure raised the cigarette sales tax from 10 cents to 35 cents a pack and increased taxes on other tobacco products as well. More than $572 million in revenue was collected during fiscal 1990 and an estimated $547 million is expected in fiscal 1991.

Revenue from the measure is being apportioned among tobacco-related health and education programs, medical care for low-income people and environmental programs, including fire prevention and conservation. A state-sponsored anti-smoking campaign, featuring a bold media advertising attack on tobacco use, is among the programs being funded by the measure.

The initiative was challenged by Kennedy Wholesale Inc., a Glendale tobacco distributing and wholesale firm, which contended that Proposition 13 mandated that only the Legislature could raise state taxes, and then only by a two-thirds vote of both houses.

The voters, the suit said, could increase state taxes only by a constitutional amendment--not through a statutory change, as in Proposition 99. Initiatives proposing a constitutional amendment require signatures of 8% of the voters in the last gubernatorial election. Statutory changes require only 5%.

State attorneys defending the measure argued that while Proposition 13 limited lawmakers’ authority to raise taxes, there was no intention to limit the voters’ ability to raise taxes through an initiative.