Revenue vs. Expenses

According to a May 26, 2006 Executive Summary published by the Tobacco Control Section of the California Department of Health LINK the ballot measure will raise $2.27 billion per year in new cigarette excise tax revenues and another $58.6 million each year in increases sales tax revenue.

A July 20, 2006 Legislative Analyst’s Office report LINK that shows allocations for $2.1 billion per year in new tax revenues from this measure, the three largest beneficiaries of those new tax revenues are:

1. Hospital emergency care: $756 million
2. Children’s health coverage: $367 million
3. Tobacco control:
a.) Tobacco cessation: $ 18 million
b.) Media campaign: $ 55 million
c.) Competitive grants $ 36 million
d.) Local health departments $ 34 million
e.) Prevention education: $ 18 million
f.) Evaluation: $ 4 million
g.) Research: $ 32 million
Tobacco Control Total: $197 million

The bottom line is that the California Department of Health projects $2.3 billion in immediate revenue from Proposition 86 and the Legislative Analyst’s Office itemizes a full-page list of $2.1 billion in long-term, permanent state costs that will legislated for taxpayers if Proposition 86 passes. Predictably, the principal beneficiaries of new tax revenues from that ballot measure are also those who have sponsored and are aggressively promoting the ballot measure.

But what if the projected $2 billion-plus in new cigarette tax revenues do not materialize as represented? Taxpayers in Washington have learned a tough, expensive lesson about tobacco control advocate’s revenue projections since I-773 passed in 2001. Washington has the strictest smoking ban in the nation, even exceeding California’s ban, and the third highest cigarette excise tax as well ($20.25 per carton.) But careful analysis of cigarette consumption reveals an important fact: Washington collects only 55 percent of the cigarette excise taxes that its adult smoking prevalence rate says it should receive. If Washington’s trend follows in California, all taxpayers – smokers and nonsmokers alike – would be funding with new taxes a revenue shortfall of $1 billion per year to fund the long term, permanent costs created by Proposition 86. Considering that Proposition 86 would place California as the No. 1 cigarette tax in the nation with $3.47 per pack in total taxes, taxpayers can reasonably expect that declines in taxable cigarette consumption, and therefore cigarette taxes collected, could be even more severe.

Next

 
; ;