The Proposition 86 poor tax

ANDREW CHAMBERLAIN and PATRICK FLEENOR are economists at the Tax Foundation in Washington.

IN CALIFORNIA, a state famous for its progressive politics, a proposition on the Nov. 7 ballot includes a shockingly regressive tax on the state’s poorest residents. Unfortunately, that’s the reality behind Proposition 86 — an initiative that aims to cut smoking through a dramatic hike in the state’s cigarette tax, from 87 cents to $3.47 a pack, the nation’s highest rate.

While it’s nice to pretend that cigarette taxes come out of the hides of Big Tobacco, it’s mostly low-income groups who take it on the chin when cigarette taxes rise.

Low-income Californians are much more likely to be smokers, and as a group they spend a lot more on cigarettes than the wealthy as a percentage of their income. One recent analysis of U.S. Census data found that tobacco taxes take a 50-times-larger share of income from those earning less than $20,000 than those earning more than $200,000. That makes cigarette taxes the most regressive way of funding state government programs.


The general sales tax is routinely derided as unfairly regressive, but it’s like a millionaire’s tax compared with the tax on cigarettes.

Most people who support progressive taxes — that is, taxes that fall most heavily on the wealthy — would consider such a regressive tax outrageously unfair. So if Californians plan to raise taxes on smokers, who are disproportionately also among the state’s poorest, they’d better have a good reason.

What might be a good reason? One would be if smokers imposed costly damages on nonsmokers in society. Do smokers impose “spillover” burdens on society, justifying a special tax on them?

It turns out they don’t. Over the last 15 years, evidence has accumulated showing smokers hardly cost society more than anyone else. Dozens of peer-reviewed studies throughout the 1990s from economists such as Harvard’s Kip Viscusi and Willard Manning Jr. from the University of Chicago demonstrate conclusively that nearly all the costs of smoking — healthcare, higher insurance premiums, lower productivity at work — are borne by smokers themselves.

Over their lifetimes, smokers cost taxpayers only trivially more than nonsmokers — about 32 cents a pack, according to most studies. That’s far below the current tax of 87 cents a pack and a fraction of the $3.47-a-pack tax supplied by Proposition 86.

Once we realize smokers are mostly hurting themselves and not others in society, we’re left with an ugly reality: The only justification for a $3.47 cigarette tax is straightforward paternalism. The rich have always turned up their noses at uncouth behaviors of the poor. Proposition 86 just burnishes that condescension into state law, raising some revenue in the process.

But the worst aspect of such condescension? It doesn’t work very well. Punitive approaches such as higher cigarette taxes don’t make smokers quit. They cause smokers to buy tax-free cigarettes on military bases, Indian reservations and over the Internet. Even with today’s 87-cent tax, the California Board of Equalization says about 300 million untaxed packs of cigarettes are sold in the state each year — a figure that will boom if Proposition 86 passes.

The programs funded by Proposition 86 have broad public appeal. Health insurance for low-income children, funding for emergency hospital services and public education about the health risks of tobacco are supported by most Californians. So why not fund them with broad-based taxes on everyone?

Raising cigarette taxes isn’t just bad for the poor. It’s bad for lawmakers’ credibility. Who really believes California politicians are “anti-smoking” when they’re hooked on tobacco-tax cash themselves?