Capitol Alert

California tobacco tax measure targets an industry under pressure

On a cool spring day at the Capitol, Toni Atkins delivered a series of blows unlike anything the tobacco industry had ever felt in California.

Then speaker of the Assembly, the San Diego Democrat had been a lame duck for the last six months since the house elected Anthony Rendon to replace her. It was a Thursday morning in March and her final session as speaker, a tenure that lasted just shy of a year and 10 months.

With the clock ticking, she saw a rare opportunity to pass a historic package of tobacco laws – and took it.

“It was personal,” said Atkins, who grew up breathing in secondhand smoke and lost her mother to throat cancer. “If I have an opportunity to prevent that sort of thing before people get started, I felt an obligation to do that, especially as speaker.

“There’s nothing like the last minute to get things done.”

In a series of quick votes, the Assembly passed six smoking bills, the most significant of which raised the age to buy tobacco products to 21 and regulated e-cigarettes like tobacco products. The Senate followed the next week. Gov. Jerry Brown signed all but one of the bills – a bid to allow local communities to determine their own tobacco taxes – into law.

The move marked the start of a new war on tobacco. Now a broad coalition of environmentalists, labor unions and health advocates who helped shepherd the bills through the Legislature is gearing for another battle with the industry in November.

A statewide measure expected to qualify for the ballot would add $2 in taxes on tobacco products, e-cigarettes and vaping sales, a change that could cost the industry millions if voters pass it in the fall. Californians now pay an 87-cent tobacco tax on a pack of 20 cigarettes, which hasn’t changed since 1998.

“It’s a remarkable turnaround,” said Stanton Glantz, the Truth Initiative Distinguished Professor of Tobacco Control at UC San Francisco. “The tobacco industry has totally dominated the decision-making process for the last two decades, and they’ve done it with money. Most of the money has gone to Republicans, and enough has gone to the Democrats to keep them under control.”

The tobacco industry is among the wealthiest outside interests influencing California politics. It has put $4.1 million into state political campaign committees since 2013, with the largest share coming from Philip Morris USA, its parent company Altria and R.J. Reynolds. Philip Morris sells Marlboro, the most popular cigarette in America, which claims a 44 percent share of the market. Reynolds sells Camel and Newport brands, among others.

As the campaign mounts, players in the longstanding struggle say the new anti-smoking laws and well-funded backers of the ballot measure are signs of the industry’s waning influence in state politics. Others say it’s too early to underestimate a well-funded industry with a recent track record of winning statewide tax campaigns.

“The financial resources of the tobacco industry make them a very formidable foe,” said Jim Knox, vice president of government relations for the American Cancer Society Cancer Action Network in California. “They have been lying to the public for decades about the deadliness of their products, and they aren’t going to stop now.”

Going up against tobacco is like fighting a ghost, said Jim DeBoo, the campaign manager for the ballot measure. Tobacco lobbyists rarely speak up at committee hearings and instead opt for less public forums.

At a routine hearing on the ballot measure last week, Assemblyman Jim Wood, D-Healdsburg, noted that the tobacco companies were absent from the room.

“I wanted to let members of the public known that we did reach out to several other interest groups regarding their positions on the initiative and whether they would like to participate,” Wood said. “Altria never got back to us, and the Chamber of Commerce and several tax groups told us they were not going to have a position on the initiative in time to testify today.”

David Sutton, a spokesman for Altria, declined to answer questions for this story. In a statement, he said the company opposes “large targeted” tobacco and e-vapor taxes and is considering its options on the ballot measure.

The tobacco companies haven’t coordinated with the vaping industry to help defeat the initiative, said Steve Cruz, a lobbyist for the Smoke Free Alternatives Trade Association, which opposes the initiative because it would apply the same tax increase to their products.

“The vaping industry honestly hopes they pour millions into the measure and kill it,” Cruz said. “But we haven’t heard anything yet.”

Tobacco has killed two of four ballot measures to increase taxes on its products in the last 28 years.

In 1988, the American Cancer Society and the American Lung Association backed an initiative to raise taxes on tobacco sales. Voters passed the measure, which raised cigarette taxes from 10 cents to 35 cents a pack, after proponents’ ads featured actor Jack Klugman and others arguing that the measure would “save lives.”

Ten years later, voters increased taxes on cigarette sales again by 50 cents a pack.

In 2006, tobacco beat a measure to raise taxes on its products by $2.60. Its advertising argued that the measure was unfair to smokers and tobacco users who paid the tax because only a fraction of funds would go to smoking-related programs, while hospitals would receive “hundreds of millions a year.”

Another attempt to increase taxes failed in 2012. Proposition 29 would have increased the excise tax on cigarettes from 87 cents a pack to $1.87. The industry outspent the anti-tobacco side 4-to-1 during that campaign, according to the California Tobacco Control Program. The measure was defeated by a slim margin, with 50.2 percent of the vote against it.

“In politics, whoever has the most money has the biggest megaphone,” said Jessica Levinson, a professor at Loyola Law School in Los Angeles and president of the Los Angeles Ethics Commission. “That’s true when you’re affecting the legislative process and the ballot initiative process.”

Anti-tobacco advocates believe changes in attitudes toward tobacco and a decline in smoking rates will give the coalition more momentum this year.

Thirty years ago, a quarter of Californians identified as cigarette smokers. They were allowed to light up in bars, restaurants, airplanes, workplaces, schools and day care facilities. Cigarettes were sold in vending machines.

At last count in 2013, 11.7 percent of Golden State residents said they smoke, according to data from California Health & Human Services.

DeBoo said the coalition’s funding and powerful allies also make it better prepared to take on tobacco than in previous attempts, although he still said he expects tobacco to spend $3 for every $1 the coalition puts into the campaign. The coalition believes it needs to raise at least $25 million total to beat tobacco interests in November.

“In the past, the coalition had been fighting gun fights with sticks almost,” he said. “This time around, we are more evenly matched.”

This year, the ballot initiative’s registered proponents read like a dream team of political power players: Dustin Corcoran, chief executive of the California Medical Association; LaPhonza Butler, president of SEIU California State Council; Olivia J. Diaz-Lapham, chief executive of the American Lung Association in California and Tom Steyer, a deep-pocketed philanthropist and environmentalist.

Authors of the initiative artfully directed annual funding from the tobacco tax to various state agencies, thereby increasing support for the measure.

Most of the money would go to support Medi-Cal, incentives for SEIU and doctors to back the initiative. Similarly, the act directs $40 million in funding to the University of California to train doctors and another $30 million to the California Department of Public Health’s dental program. The attorney general’s office would receive another $30 million to distribute to local police agencies, among other funds.

A change in approach also played a part in passage of this year’s legislation, anti-tobacco advocates note. Lawmakers slid the tobacco bills into a health special session called last year by Gov. Jerry Brown to replace an expiring tax that helps pay for Medi-Cal.

The maneuver allowed lawmakers to circumvent the Assembly Governmental Organization committee, where past tobacco legislation has gone to die. Since 2013, tobacco companies have given $52,000 to the campaign fund and ballot measure committee of Assemblyman Adam Gray, D-Merced, who chairs the committee.

The bills instead were sent to the Public Health and Developmental Services Committee, where they sailed through. Members of the pro-tax coalition stalked the halls and lobbied for the bills.

“The tobacco epidemic is an epidemic caused by politics,” Glantz said. “The only reason the tobacco companies continue to survive is because they are being protected by politicians like the GO committee. If they didn’t have the kind of political shelter that they have, we wouldn’t have a problem.”

Rendon, who teamed up with Atkins to push the tobacco bills through the Assembly, said the new tobacco laws show that the industry isn’t invincible in California. Rendon said he hasn’t accepted a dime of their money.

“It says that we’re willing to stand up to tobacco and that the forces on the other side can beat tobacco,” Rendon said of the bills. “We’re not afraid of them, and we’ll take them on.”

Jim Miller contributed to this report.

Taryn Luna: 916-326-5545, @TarynLuna

Tobacco taxes

1988: Voters approve Proposition 99 to raise tobacco taxes by 25 cents

1998: Voters pass Proposition 10 to raise tobacco taxes by 50 cents

2006: Voters reject Proposition 86 to add $2.60 on tobacco sales

2012: Voters reject Proposition 29 to raise tobacco taxes by $1