Petition Could Nearly Triple California’s Cigar Tax

A petition filed with the California Office of the Attorney General to raise the cigarette tax by $2 per pack could mean a substantial increase to the cigar and other tobacco products (OTP) tax should it reach and pass the November ballot.

Because California bases its OTP tax on the ratio of the total cigarette tax to the weighted average wholesale cost of one cigarette, raising the tax would significantly increase that ratio.

Currently, California’s OTP tax sits at 28.13 percent of the wholesale cost, a number arrived at by dividing the total taxes on a single cigarette—6.85 cents—by the weighted average wholesale cost of one cigarette—24.35 cents. Adding that extra dime to the cigarette tax would result in a new ratio of 69.2 percent, meaning that a cigar with an MSRP of $9.50 would go from costing an estimated $12.17 before state and local sales taxes to $16.07, again before sales taxes.

The petition is backed by noted political contributor and billionaire Tom Steyer, a former hedge-fund manager and environmental activist who is also considered a possible candidate for governor in 2018. He has personally contributed $1 million to the signature gathering effort and has already garnered the support of numerous health organizations. The group, called Save Lives California, estimates that the tax would generate $1 billion annually, creating a fund that would direct the majority of that money to Medi-Cal coverage for low-income residents, as well as funding treatment of tobacco-related diseases and smoking cessation programs.

The petition needs the signatures of 585,407 registered voters in order to appear on the November ballot. The Associated Press reports that the group claims to have collected more than one million signatures as of Monday afternoon.

(Featured image via Thomas Wolf, CC BY-SA 3.0 de)