$1.50 tax per pack
For years tobacco companies have successfully fought off attempts by California lawmakers and health groups to increase the cigarette tax. But next month, as the state grapples with the worst financial crisis in recent history, that may change.
Lawmakers will consider a proposal to hike cigarette taxes by $1.50 per pack and raise $1.2 billion annually. During the last decade, cigarette makers have spent tens of millions of dollars to kill 14 straight attempts to make smokers pay more.
But with the state facing a staggering $21.3-billion deficit and due to run out of cash in July, the tobacco tax could have a better chance of passing the Legislature.
“Given the serious budget shortfall we face, this is the year to pass the tobacco tax,” said Sen. Alex Padilla (D-Pacoima). “It is needed now more than ever.”
Padilla wrote the current proposal with Senate leader Darrell Steinberg (D-Sacramento), but even with Steinberg’s support, it faces an uphill battle. The tobacco industry sees California as a crucial market and a trendsetter for anti-tobacco ideas that can spread through the country, said Beverly May, regional director of Campaign for Tobacco Free Kids, a Washington anti-smoking group.
“The tobacco companies view California very much as a battleground state,” she said. “California is a state that they look at as important to do everything they can to have influence in any way they can.”
Frank Lester, a spokesman for Reynolds American Inc., said proposals to raise tobacco taxes in California have failed in part because the state’s residents are compassionate and see the tax as unfair.
“When people realize who the burden falls on -- the tax tends to be one of the more regressive taxes, meaning it falls on people of lesser means and working families -- they tend to think twice about it,” Lester said.
He also said California voters are “dubious” about how past tobacco taxes have been spent. He cited media reports about the use of Proposition 10 tobacco proceeds, approved by voters in 1998 for childhood development programs, to pay for political ads promoting another ballot measure.
Forty-five states have raised tobacco taxes during the last decade, but not California.
Despite California’s health-conscious image and laws that ban smoking just about everywhere, including bars and beaches, the state’s cigarette tax of 87 cents per pack is lower than such taxes in other states. In Rhode Island, where tobacco taxes are highest, the levy is $3.46 a pack.
The last substantial effort to raise cigarette taxes in California was three years ago, championed by a coalition that included the American Lung Assn., American Cancer Society and American Heart Assn. The groups helped put on the statewide ballot a proposal to raise cigarette taxes by $2.60 per pack to fund health programs.
Opinion polls have consistently shown support for higher tobacco taxes in the Golden State. But tobacco companies, which poured $66 million into defeating the measure, outspent proponents more than 4 to 1. The industry blitzed the radio airwaves with ads alleging that the tax was a ploy to boost profits for hospitals and HMOs.
The industry also hired Sacramento political consultant Alice Huffman for $160,000. Huffman runs the California NAACP, which took a stand against the ballot measure.
The proposal failed.
This year, R.J. Reynolds and Philip Morris USA, the two largest tobacco firms, are not among the groups that have sent letters to senators expressing opposition to the Steinberg-Padilla proposal.
But senators have received statements of opposition from the California Chamber of Commerce, California Black Chamber of Commerce, the Black Chamber of Commerce of the San Fernando Valley, the Assn. for Los Angeles Deputy Sheriffs, the California Taxpayers Assn. and the Neighborhood Market Assn.
But according to records and interviews, all of those groups have received donations from Altria Group Inc., which owns Philip Morris.
Altria bought a full-page ad in a booklet put out by the Sheriff’s Department deputies for their annual banquet. And the company gave $145,000 in the last year to JobsPac, a political action committee cosponsored by the California Chamber, as well as $4,000 to the Neighborhood Market group’s political action committee.
“It’s very deceptive,” said Stanton Glantz, professor of medicine and director of the Center for Tobacco Control Research and Education at UC San Francisco. “The tobacco companies have a long history of giving money to groups representing businesses and ethnic minorities to buy their allegiance.”
Altria spokesman William Phelps declined to disclose the total given to groups opposing tobacco taxes in the Legislature.
“As a member of the business community in California and other parts of the country, we support and work with many business associations throughout the nation. I’m not going to comment on the details of that support,” Phelps said.
The California Black Chamber lists Altria as a sponsor on its website, a membership level that costs about $5,000 annually, said Aubry Stone, president and chief executive of the business group.
“It doesn’t influence my decision” to oppose the tax proposal, Stone said in an interview. “There are more smokers among people of color, and they will have to pay the extra tax.”
Simon Tung, president of the Asian Business Coalition, wrote to senators that “minority businesses, large and small, cannot afford increases in the cost of doing business and still remain viable in a global economy.”
In an interview, Tung said Altria has paid thousands of dollars to buy banquet tables at events put on by his group in the last year.
“We welcome the charity,” he said. As for the tobacco tax, he added, “We would probably oppose it without the [Altria] money.”
Banquets aside, tobacco companies give most of their gifts and campaign contributions to Republicans, who are already inclined to oppose taxes. Though a minority in the Legislature, they have enough votes to stop tax hikes and have done so repeatedly.
Altria has spent $7,300 during the last two years treating key state legislators and their spouses to expensive dinners. Philip Morris and Reynolds spent a combined $1.25 million last year and $483,000 in 2007 on campaign contributions to help dozens of legislators get elected.
During the last decade, in addition to the 2006 ballot measure, 13 bills that would have allowed the Legislature to raise tobacco taxes were defeated. Eight never made it out of committee, and none of the others made it to a vote of the full Assembly and Senate.
In 2005, Sen. George Runner (R-Lancaster) voted against a tobacco tax increase and still opposes one, saying that a tax hike would hurt the poor disproportionately and drive tobacco sales underground. Runner and his wife, then an assemblywoman, received $15,000 in 2005 from Reynolds and other tobacco firms.
The bill died in the Senate Revenue and Taxation Committee. All three Republicans on the eight-member panel received money from tobacco firms.
All four Republicans and one of the seven Democrats on the 11-person Senate Health Committee also have received contributions from the tobacco industry. The committee will soon consider the latest tax hike proposal.
Sen. Tony Strickland (R-Thousand Oaks), the committee vice chairman, received $16,000 directly from tobacco companies during the last year. And tobacco firms gave more than $440,000 last year to the California Republican Party, which spent $1.5 million promoting Strickland for the state Senate.
Strickland said he would oppose the bill. It doesn’t make sense to fund state programs with a source that will decline as fewer people smoke, he said.