Voters will decide the future of a proposed tobacco tax, as on Thursday California Secretary of State Alex Padilla announced that Proposition 56 qualified for the ballot.
The proposition seeks a $2 per pack increase in the tax on cigarettes, but because California bases its tax rate for other tobacco products (OTP) such as premium cigars 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 needed 585,407 registered voters to sign it in order to appear on the November ballot; according to the Secretary of State’s office random sample report, the petition has garnered 682,346 valid signatures.
Proposition 56 is being supported 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. Steyer contributed $1 million to the signature gathering process.