Age, Tax Increases & Smoking Ban Bills Threaten California

While most state legislatures are relatively dormant, a variety of changes to how tobacco is regulated and taxed in California have been proposed under the special session on Health Care Financing Issues. Earlier this week, early steps in what is expected to be a lengthy battle on a variety of fronts got underway.

There are two special legislative sessions currently underway in California and they are likely to last well into next year. One is related to transportation funding, while the other relates to health care financing. That being said, those are only broad topics for the legislature and a variety of new laws have been proposed. For cigar smokers, these include an expanded smoking ban, an increase on the minimum age to purchase tobacco from 18 to 21 and a tax increase on tobacco products.

Sen. Bill Monning, D-Carmel, has proposed S.B.X2 6, which would modify the state’s smoking ban to include most businesses with greater than five employees. The introduced language shows the removing of the exemption for tobacco shops and lounges, but at a hearing earlier this week, Monning supported “smoking in cigar stores and lounges.”

Not safe are the exemptions for bars, restaurants and gaming clubs.

Back on the table is a potential increase to the minimum age required to purchase tobacco in California. Sen. Ed Hernandez, D-West Covina, has introduced S.B.X2 7, which would raise the age required to purchase tobacco from 18 to 21. Hernandez sponsored similar legislation earlier in the year.

While the original legislation cleared the California Senate with ease, it struggled in the House, forcing Hernandez to pull the bill before a vote took place. This time, the results could very well be different.

The rules and timeline for the special legislative session mean that it will likely be easier to pass the bill. This will likely be the first time there is a real fight on a statewide level over a minimum purchasing age increase.

While more than a half dozen states have unsuccessfully attempted to pass legislation, few have had the support that the legislation will have in California. Earlier this year, Hawaii became the first state to pass the legislation, but in that instance, there was little opposition support.

If passed, this could also serve as a model for other states to pass the legislation.

Sen. Mike McGuire, D-Healdsburg, has introduced S.B. 2X 9, a bill that would allow for local municipalities to introduce its own additional taxes on tobacco products.

There are other tobacco related bills: S.B.X2 5 would define e-cigarettes and other electronic nicotine delivery devices as tobacco products and S.B.X2 8 would ban tobacco use on any school district property.

One item that has not been introduced, but is widely expected, is increase in the tax on cigarettes. Currently, California taxes cigarettes at 87 cents per pack, but there is expected to be a proposed increase to $2 per pack.

California taxes cigars and other tobacco products based off of the cigarette tax. The Board of Equalization divides the tax rate per cigarette—currently 4.35 cents—by the average wholesale cost per cigarette. This rate changes at the beginning of each year, it currently is 28.13 percent of the wholesale cost and has stayed around 30 percent since 2011.

In 2013, a bill was introduced to raise the tax on cigarettes to $2 per pack and the state estimated at the time that would set the tax on cigars and other products to 67.41 percent of the wholesale cost, more than double the current rate.

While California is not known for being particularly tobacco-friendly, it currently has only the 15th highest tax rate on cigars in the nation. The potential increase would put it firmly into the top five as far as highest tax rates. A cigar with an MSRP of $9.50 likely retails for around $12 in the state currently, that price would increase to almost $16 with the added taxes.

Charlie Minato

I am an editor and co-founder of halfwheel.com/Rueda Media, LLC. I previously co-founded and published TheCigarFeed, one of the two predecessors of halfwheel. I have written about the cigar industry for more than a decade, covering everything from product launches to regulation to M&A. In addition, I handle a lot of the behind-the-scenes stuff here at halfwheel. I enjoy playing tennis, watching boxing, falling asleep to the Le Mans 24, wearing sweatshirts year-round and eating gyros. echte liebe.