Tobacco retailers , still fuming over 1998’s Proposition 10, which enacted an additional tax on cigarettes and other tobacco products , are now looking to overturn the ballot measure.
Proposition 28, which will appear on the March 7 ballot, seeks to rescind the tobacco tax enacted by Proposition 10. It would also stop funding for family and health programs funded by the new tobacco tax.
Charles Janigan, president of the California Association of Retail Tobacconists, said Proposition 10 is against state law.
“What Proposition 10 did (was) impose a punitive tax on a minority, and that minority is the smokers of the state of California, to fund a program for the majority. And the program is the Children and Families Commission. So right there we have a violation of the California single-subject rule that applies to ballot initiatives.”
According to the single-subject rule, special taxes collected from smoking must be spent on smoking programs. Money from Proposition 99, an earlier tax enacted on cigarettes in 1988, does get spent on smoking programs, and therefore is not a target of Proposition 28.
Only 6 percent of the Proposition 10 money gets spent on anti-drug, anti-alcohol and anti-smoking programs, Janigan said.
But that’s not the only reason he wants to repeal the new cigarette tax. It also unfairly targets cigars and pipe tobacco. Buried in the language of Proposition 10 was an “equivalent tax on other tobacco products,” Janigan said.
Taxes More Than Cigarettes
“We don’t believe that the voters understood what equivalent tax meant, or what it could ultimately mean in the hands of the State Board of Equalization,” he said. “It took the tax on cigars, pipe tobacco and the smokeless tobacco, and increased it by 135 percent.”
Charlie Hennegan, owner of Liberty Tobacco on Clairemont Mesa Boulevard, noted that the tax on cigars now stands at 66 & #733; percent , a figure he said was outrageous.
“I always like to take it and put a dollar amount on it at that point. If you were to talk about a box of cigars that you’re selling, that might equal out to $50 on an average box of cigars. So stop and think for a second, 50 cents for a pack of cigarettes, $50 on a box of cigars. We think it’s a very unfair tax.”
Making the tax doubly unfair is customers no longer have to shop in the local tobacconist. People will go out of their way to avoid the tobacco taxes, he said.
“The buyer goes out of state to avoid the huge taxation. They go to the Internet, they go to 1-800 mail order houses back East, they go to Indian reservations. Or they call their brother Fred in Dallas and say, ‘Send me cigars.’ And so it creates a big problem for California retailers,” Hennegan said.
Retail Industry Hit Hard
Stores have had to close, or lay off workers. That costs the state and local government in terms of lost wages and lost income tax and revenue, Hennegan said.
About 100 stores have closed throughout California, while there have also been several personal bankruptcies, Janigan said.
Janigan noted there are several legal cases seeking to overturn Proposition 10 on legal grounds. One of them has been filed in San Diego Superior Court and is scheduled to be heard June 2, he said.
Meanwhile, the campaign to enact Proposition 28 , overturning Proposition 10 , continues. The initiative has the support of the San Diego County Taxpayers Association, the Libertarian Party and the California Chamber of Commerce.
They chiefly object to the creation of a new tax, said Kathy Fairbanks, a spokeswoman for the California Chamber of Commerce. At the same time, money collected from the tax is going to fund a bureaucracy overseeing programs unrelated to smoking.
A large coalition of health and civic groups are opposed to Proposition 28. These include the American Association of Retired Persons, the American Cancer Society, the American Lung Association, the American Heart Association, California Medical Association, California Nurses Association and the Campaign for Tobacco-Free Kids.
Helps Stop Smoking
Robin Brown, a spokesman for the local chapter of the American Cancer Society, disagreed with Janigan’s contention the additional tobacco taxes have instead moved people to buy cigarettes elsewhere. Instead, fewer people are buying tobacco , which was the original intent of Proposition 10 and Proposition 99 before it.
“With each uptick of those taxes, smoking rates drop down proportionately in the other direction,” he said. “And (when) you talk to people who’ve quit smoking, increasingly more of them are citing the fact that it just doesn’t fit their lifestyle, and the cost of smoking, compared to what sort of identity they had in the past, doesn’t match. It’s been a big incentive for a lot of people.”
The increase in prices also helps keep cigarettes out of the hands of children. Without those protections in place, more children will take up the habit, Brown said.
