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Politics

Election 2016 FAQ: Proposition 56, Tobacco Tax Increase

Reynolds American cigarette brand American Spirit are on display at a liquor store in Palo Alto, Calif., Feb. 1, 2011.
Associated Press
Reynolds American cigarette brand American Spirit are on display at a liquor store in Palo Alto, Calif., Feb. 1, 2011.

Proposition 56 raises the tax rate for tobacco from one of lowest in the country to one of the highest See a list of all our proposition explainers here.

California Counts is a collaboration of KPBS, KPCC, KQED and Capital Public Radio to report on the 2016 election. The coverage focuses on major issues and solicits diverse voices on what's important to the future of California.

The basics

In 2012, a state proposition to raise the California tobacco tax rate failed by one-half of 1 percent of the vote. Now, health advocates are trying again with Proposition 56.

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California has one of the lower tobacco tax rates in the country, and tobacco taxes haven't been raised since 1998. If Proposition 56 is approved, the state would have one of the highest, rising from 87 cents to $2.87 per pack of cigarettes. (New York is No. 1 at $4.35 per pack.) The tax would also apply to other tobacco products, such as cigars. This time around, e-cigarettes are included.

Research shows that raising the price of cigarettes helps prevent teens and young adults from taking up the habit. The higher price can also help motivate current smokers to quit. Backers of the measure say that helping people quit or never start smoking at all will save lives. In addition, the tax would raise a lot of money.

According to the state’s Legislative Analyst's Office, the tax is expected to generate $1.2 billion to $1.6 billion in its first year. Some of the money is earmarked for programs to help people quit or never start smoking or to train primary care doctors. But most of the money will go to Medi-Cal, the state's health insurance program for people who have low incomes. One in three Californians is covered by Medi-Cal.

The proposition puts most of the tax revenue in a new special fund to be used by the state agency overseeing Medi-Cal. The agency can't use this tax revenue to replace other dollars.

Who are the supporters and opponents?

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The tobacco industry opposes the tax and is the major funder of the "No" campaign. It cites a list of shortcomings in the measure.

Opponents call the proposition a tax hike grab by insurance companies. This may be because most of the 13 million people covered by Medi-Cal are enrolled in managed care plans run by insurance companies and paid for by the state.

They say the measure doesn’t require any additional people to be covered. Since the Affordable Care Act took effect in 2014, Medi-Cal has added 4.5 million more people. Most analysts believe there are few eligible people left who aren’t covered.

And they say that no tobacco tax revenue will go toward schools. This may be a reference to a funding formula approved by voters in the 1980s, requiring that a percentage of general fund revenue go toward education. Proposition 56 revenue would skirt that formula.

If passed, this tax would take effect April 1, 2017.

Fiscal impact — by the League of Women Voters of California Education Fund

The state would collect between $1.3 billion and $1.6 billion in the first year of the tax. In future years, the money collected could be lower if people buy fewer tobacco products. Most of the money would be used to pay for tobacco education, extra training for doctors and the state’s health care program for low-income Californians.

Supporters say — by the League of Women Voters of California Education Fund

  • Raising taxes on tobacco products will help prevent people from smoking.
  • Proposition 56 would provide millions of dollars for important health care programs.

Opponents say — by the League of Women Voters of California Education Fund

  • Proposition 56 does not provide enough money to help people quit using tobacco.
  • Proposition 56 would spend too much money enforcing the tobacco tax. 

How much is being spent on the campaigns?

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