California Tobacco Tax Hike Formally Introduced

As we reported last week, a special session in California has opened the floodgates for a variety of anti-tobacco related bills and now, as expected, a massive tobacco tax hike has been formally introduced.

Yesterday, Reps. Rob Bonta, D-Oakland, and Tony Thurmond, D-Richmond, introduced A.B.X2 16, a bill that would raise the tax on cigarettes to $2 per pack, up from the 87 cents currently charged.

Taxes for other tobacco products, including cigars, are based on the rate in which cigarettes are taxed. 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.

The $2 cigarette tax has been proposed before. In 2013, the Board of Equalization estimated that if the cigarette tax was raised to $2 per pack, the tax on other tobacco products, including cigars, would more than double, to 67.41 percent of the wholesale price.

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.

A legislative source told halfwheel that it is expected that the bill will not be voted on towards the end of the special session. Unlike the rest of the proposed tobacco changes, an increase in taxes will require a two-thirds majority in both houses of the California legislature.