Another election, another attempt to use popular smoking taxes to funnel money to the well-connected in Sacramento.
Proposition 56 would increase the cigarette tax by $2 per pack, apply tobacco taxes to vaping and e-cigarette products, and would raise an estimated $1 billion to $1.4 billion per year, declining over time, purportedly to go to health care spending for low income Californians.
The first thing that jumps out about Proposition 56 is how it defies the voters’ will on education funding. Years ago Californians voted that a share of all new taxes must go to funding schools. If the legislature passed this tax, about $600 million for the revenue would go to schools.
But like with so many new taxes these days, Prop. 56 exempts itself from that requirement. Taxes will go up, but a smaller share of state revenue will go to schools. Brilliant. And in direct defiance of California voters’ desire that increases in state revenues include a significant share going to schools.
The second thing is that, while people love to tax others, and not themselves, and the ever dwindling number of smokers are an ever popular target, there is a limit to how far you go with this and still get any money out of it.
And a limit to the arguments that the higher taxes will reduce smoking and make us all better off. California already has the second lowest percentage of state residents who smoke among all 50 states. So, because so many Californians have been discouraged from smoking, this tax increase is much more about a money grab than it is about reducing smoking.
And with ever fewer smokers to tax, does it make any sense to keep going back to that ever dryer well to try to raise new revenue?
Finally, Prop. 56 supporters say it would provide $1 billion or more for funding Medi-Cal health services. But every time we earmark a new tax to go to some part of state spending, legislators cuts other funds for that area and spend them where they want to, not where voters do.
It happens over and over. Past tobacco taxes failed to raise total state health care spending. Even past taxes and bonds dedicated to schools have failed to raise school budgets when legislators simply cut other school funding sources.
In this case it is even worse, because Prop. 56 does not specify where and how most of the new tax money is to be spent on health care. Instead, that will be decided in legislative bargaining over each year’s state budget. Which means that the hospitals and insurance companies with the best lobbyists and most friends in the legislature will get the lion’s share of the funds.
How nice for them. The poorest health care consumers won’t even be at the bargaining table.
Adrian Moore is the vice president of the Reason Foundation.