The twin aims of Proposition 56 make for strange bedfellows.
The initiative, which voters overwhelmingly passed on Nov. 8, will increase California’s tobacco tax by $2 per pack, generating hundreds of millions of dollars in new funding for the state’s health care program for the poor. But supporters argued that raising the price of cigarettes and other tobacco products is also a benefit to public health that decreases the number of smokers – thereby reducing, in the long run, the revenue that any new tax will generate.
So how does the state resolve this conundrum? Perhaps, ultimately, by increasing the tobacco tax again.
Before any revenue from Proposition 56 is disbursed for health care, it will be used to backfill the budget losses of tobacco education, cancer research and early childhood development programs funded by previous taxes. The idea is that those programs will not be negatively impacted by changes to tobacco consumption caused by Proposition 56.
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The system is already in place with the last tobacco tax that California voters approved, 1998’s Proposition 10, which created First 5 commissions. A portion of those 50 cents from each pack of cigarettes sold in California is used to offset its effects on a 2-cent excise tax for breast cancer research and detection services passed by the Legislature in 1993 and on 1989’s Proposition 99, which raised the tobacco tax by 25 cents for an array of health programs.
The backfill this year totals $15.3 million, about 3.6 percent of the $424.5 million Proposition 10 generated in the 2015-16 fiscal year, according to the State Board of Equalization, which will approve the transfer at its meeting today. That’s down slightly from last year, when $16.1 million was set aside for the budget replacement.
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