BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 768 HEARING: 5/8/13
AUTHOR: de León FISCAL: Yes
VERSION: 5/1/13 TAX LEVY: Yes
CONSULTANT: Lui
CIGARETTE AND TOBACCO PRODUCTS TAXES:
CALIFORNIA TOBACCO TAX ACT OF 2014
Establishes the California Tobacco Tax Act of 2014, which
imposes an additional cigarette tax at a rate of $2.00 per
package of 20 cigarettes.
Background and Existing Law
The California Cigarette and Tobacco Products Tax Law
imposes two types of excise taxes on cigarette and tobacco
products distributed in the state: 1) the cigarette tax,
and 2) the cigarette and tobacco products surtax.
Cigarettes are subject to both the cigarette tax and the
cigarette and tobacco products surtax. Distributors pay
both the tax and surtax through the use of cigarette
indicia, or tax stamps, which are purchased from the Board
of Equalization (BOE) and affixed to a cigarette package.
Currently, each stamp costs $0.87 per pack of 20
cigarettes: $0.12 cents for the cigarette tax and $0.75 for
the combined surtaxes.
A distributor, wholesaler, manufacturer, or importer of
cigarettes or tobacco products is required to register with
the BOE and be licensed. All licensed distributors,
wholesalers, manufacturers, and importers must file returns
or reports on or before the 25th of the month following the
reporting period.
State law defines "cigarette" as any roll for smoking, made
wholly or in part of tobacco, irrespective of size, shape,
or whether the tobacco is flavored, adulterated or mixed
with any other ingredient, where such roll has a wrapper or
SB 768 -- 5/1/13 -- PageB
cover made of paper or any other material, except where
such a wrapper is wholly or in the greater part made of
tobacco and weighs over three pounds per thousand. "Tobacco
products" includes all forms of cigars, smoking tobacco,
chewing tobacco, snuff and any other articles or products
made of, or containing at least 50% tobacco, but does not
include cigarettes.
There are certain transactions that are not subject to the
cigarette tax and the cigarette and tobacco products
surtaxes, like the sales by a distributor to a carrier
engaged in interstate or foreign passenger services, sales
to U.S. military exchanges, or an individual shipment of
not more than 400 cigarettes personally transported into
the state.
If a consumer purchases cigarettes or tobacco for their own
use from outside the state -- through mail, by telephone,
or the internet -- without paying the excise tax, they must
pay the tax directly to the BOE. Consumers owe the tax if
they physically bring tobacco products or more than 400
cigarettes into the state. These purchases are also
subject to California's use tax law.
Since 1998, the Legislature and voters have adopted three
tobacco tax measures:
On the November 1988 ballot, California voters
approved Proposition 99, which imposed a surtax of
$0.25 cents per package of 20 cigarettes, and created
an equivalent tax on tobacco products. Proceeds from
the taxes fund health education, disease research,
hospital care, fire prevention, and environmental
conservation.
On November 3, 1998, California voters approved
Proposition 10, which imposed an additional surtax of
$0.50 per package of 20 cigarettes, and created a
proportionately larger increase in the tax on tobacco
products. The revenues are used to fund early
childhood development programs, called "First 5."
Assembly Bill 478 (B. Friedman, 1993) added an
excise tax of $0.02 per packet of 20 cigarettes for
breast cancer research and early detection services.
SB 768 -- 5/1/13 -- PageC
The federal cigarette tax is $1.01 per pack. Current state
taxes and surtaxes are allocated in the following manner:
$0.10 to the state General Fund.
$0.25 to the Cigarette and Tobacco Products Surtax
Fund (Proposition 99, 1988).
$0.02 to the Breast Cancer Fund (AB 478,
B.Friedman, 1993).
$0.50 to the California Children and Families Trust
Fund (Proposition 10, 1998).
In November 1998, state attorney generals and tobacco
companies entered into the Master Settlement Agreement,<1>
whereby, tobacco companies, agreed to change the way
tobacco products were marketed and agreed to pay, in
perpetuity, various annual payments to compensate for
medical costs for caring for person with smoking-related
illnesses. In 2012, California received a Master
Settlement Payment around $735.7 million, which adds an
additional $0.50 tax per pack.
Proposed Law
Senate Bill 768 establishes the California Tobacco Tax Act
of 2014 and requires all revenues from the imposed taxes to
be deposited in the California Tobacco Tax Act of 2014
Fund. The bill specifies:
I. The excise tax rate and the annual cigarette tax
-------------------------
<1>
Master Settlement Agreement.
http://web.archive.org/web/20080625084126/http://www.naag.or
g/backpages/naag/tobacco/msa/msa-pdf/1109185724_1032468605_c
igmsa.pdf
SB 768 -- 5/1/13 -- PageD
rate adjustment.
II. The floor stock tax rate and cigarette stamp tax
rates.
III. Backfill provisions to specified Funds.
IV. How revenues will be deposited in the Tobacco Tax
Fund.
V. Its operative date.
I. Excise tax . SB 768 imposes an additional one-hundred
mills ($0.10) tax for each cigarette, or $2 per pack of 20
cigarettes, distributed on or after the first day of the
first calendar quarter commencing more than 90 days after
the effective date of the bill.
SB 768 requires the Board of Equalization (BOE), on or
before March 1 of each year, to calculate annually the
percent increase in the California Consumer Price Index for
all items. The adjusted rate is effective during the
state's next fiscal year. The bill provides that in no
event must the tax be less than the tax rate imposed of
$0.10 for each cigarette as of the effective date of the
Act.
II. Floor stock tax and cigarette stamp tax . A floor
stock tax imposes a one-time tax on paid fixed stamp
cigarettes and unaffixed tax stamps in a distributor,
wholesaler, or retailer's possession, to equalize the
excise tax paid on inventory before the tax increase and
inventory purchased after the effective date of a tax
increase.
To prevent possible windfalls<2>, SB 768 requires every
dealer and wholesaler, for the privilege of holding or
storing cigarettes for sale, use, or consumption, to pay a
floor stock tax for each cigarette in its possession or
under its control at 12:01 am on the first day of the first
calendar quarter commencing more than 90 days after the
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<2> If a product is purchased before the tax increase, but
sold after, the selling price can be raised and attributed
to the rate increase, representing a windfall profit to a
distributor, wholesaler, or retailer with a large cigarette
inventory before a tax rate increase, rather than excise
taxes paid to the state.
SB 768 -- 5/1/13 -- PageE
effective date of this Act.
SB 768 also requires every dealer and wholesaler, on or
before the first day of the first calendar quarter
commencing more than 180 days after the effective date of
this Act, to file a return with the BOE, on a form
prescribed by the BOE, showing the number of cigarettes in
a dealer and wholesaler's possession or under its control
at 12:01 a.m. on the additional excise tax's operative
date. The amount of the tax must be computed and shown on
the return.
SB 768 requires every licensed cigarette distributor, for
the privilege of distributing cigarettes and for holding or
storing cigarettes for sale, use, or consumption, to pay a
cigarette indicia adjustment tax for each California
cigarette tax stamp that is affixed to any package of
cigarettes and for each unaffixed California cigarette tax
stamp, at the following rates:
$2.50 for each stamp bearing the designation "25."
$2.00 for each stamp bearing the designation "20."
$1 for each stamp bearing the designation "10."
SB 768 requires every licensed cigarette distributor to
file a return with BOE on or before the first day of the
first calendar quarter commencing 180 days after the Act's
effective date on a form prescribed by the board, showing
the number of stamps of "25", "20", and "10." The amount
of tax must be computed and shown on the return.
SB 768 requires the floor stock tax and cigarette indicia
adjustment tax to be due and paid on or before the first
day of the first calendar quarter commencing 180 days after
the Act's effective date. The bill requires that payments
must be made by remittances payable to the BOE, and must
accompany the required returns and forms.
III. Backfill . SB 768 requires the BOE to annually
determine, starting within one year of the Act's effective
date, the effect of additional taxes imposed on cigarettes
and the resulting increase on tobacco products' tax have on
the consumption of cigarettes and tobacco products in the
state.
The bill provides that to the extent the BOE determines a
decrease in consumption to be a direct result of the
SB 768 -- 5/1/13 -- PageF
additional tax imposed by this Act or state law, the BOE
must determine the fiscal effect the decrease in
consumption has on the following:
Cigarette and Tobacco Products Surtax Fund
(Proposition 99, 1988),
Breast Cancer Fund,
California Children and Families Trust Fund
(Proposition 10, 1998), and
State General Fund.
SB 768 requires that funds must be transferred from the
Tobacco Tax Act of 2014 Fund to the four specified Funds to
offset the revenue decrease resulting from the imposition
of additional taxes. The bill also requires the BOE to
make transfer at times it deems necessary to further the
Act's intent.
IV. Tobacco Tax Act of 2014 Fund . SB 768 establishes the
California Tobacco Tax Act of 2014 Fund in the State
Treasury. The bill requires that all revenues, less
refunds, and backfill transfers from the additional taxes
imposed by the Act must be deposited into the Tobacco Tax
Act Fund, as follows:
____% to the Tobacco Prevention and Education
Account, which the bill creates in the Tobacco Tax Act
Fund.
____% to the Tobacco Disease Related Health Care
Account, which the bill creates in the Tobacco Tax Act
Fund.
____% to the Tobacco Law Enforcement Account, which
the bill creates in the Tobacco Tax Act Fund.
SB 768 requires the Controller, after transferring money to
backfill specified Funds, to appropriate money in the
Tobacco Tax Act Fund in the following manner:
To supplement tobacco prevention and control
programs, the Tobacco Prevention and Education Account
must be allocated:
o ___% to the State Department of Public
Health.
o ___% to the State Department of
Education.
o ___% to the University of California.
To improve existing programs that provide access to
healthcare programs for families and children, the
Tobacco Disease Related Health Care Account must be
SB 768 -- 5/1/13 -- PageG
allocated to the State Department of Health Care
Services.
To supplement funding for law enforcement that
regulates the distribution and sale of cigarettes and
other tobacco products, including the laws that
prohibit cigarette smuggling, counterfeiting, selling
tobacco without a license, selling to minors, the
Tobacco Law Enforcement Account must be allocated to
BOE, the Department of Justice, and the State
Department of Public Health.
SB 768 authorizes funds in the Tobacco Tax Fund to be
placed into the State Treasurer's Pooled Money Investment
Account for investment only. The bill provides that
interest earned must be credited to the Fund and be
deposited, apportioned, and expended only in accordance
with the Act and its expressed purposes.
The bill also provides that the Tobacco Tax Act Fund is a
trust fund established solely to carry out the purposes of
the Act, and that all revenues deposited into the Fund,
with interest earned, are continuously appropriated without
regard to fiscal year and to be expended only for the
bill's expressed purposes.
The bill prohibits taxes imposed by the bill and revenue
from those taxes from being considered part of the state
General Fund and "moneys to be applied by the state for the
support of school districts and community college
districts," known as the Proposition 98 guarantee, which
mandates a minimum level of education spending based on
three tests (Proposition 98, 1988).
SB 768 prohibits revenues in the Tobacco Tax Act Fund from
being subject to appropriation, reversion, or transfer by
the Legislature, the Governor, the Director of Finance, or
the Controller for any other purpose. The bill also
prohibits funds from being loaned to the General Fund or
any other state or local government fund.
The bill prohibits revenues in the Tobacco Tax Act Fund to
fund existing levels of service or supplant state or local
general fund moneys for any purpose.
The bill prohibits that no more than 2% of funds received
from the Tobacco Tax Act Fund be used by any department for
SB 768 -- 5/1/13 -- PageH
administrative costs.
SB 768 requires the Department of Justice, State Department
of Public Health, State Department of Education, State
Department of Health Care Services, and the University of
California to publish annually, on their respective
Internet websites, an accounting of moneys received from
the Tobacco Tax Act and how the money was spent.
V. Operative date . As a tax levy, SB 768 is effective
immediately upon enactment. Provisions governing the
additional excise tax are operative on or after the first
day of the first calendar quarter commencing more than 90
days on and after the effective date of the bill.
The bill makes several conforming changes to cross section
references in the Cigarette and Tobacco Products Law.
The bill makes legislative findings and declarations to
support its purpose.
State Revenue Impact
According to the Board of Equalization's preliminary
figures, the net total cigarette excise tax revenues is
$341.0 million for fiscal year 2013-14, and $1,417.6
million in fiscal year 2014-15.
Comments
1. Purpose of the bill . Tobacco-related diseases are one
of the leading preventable causes of death in California,
claiming nearly 36,000 lives annually.<3> California
spends around $9.1 billion in related medical expenses, and
-------------------------
<3> Centers for Disease Control and Prevention.
"State-Specific Smoking-Attributable Mortality and Years of
Potential Life Lost -- United States, 2000-2004. January
2009.
SB 768 -- 5/1/13 -- PageI
loses $8.5 billion in lost productivity annually.<4>
According to the Campaign for Tobacco Free Kids, to cover
these public costs, the average California resident has an
increased tax burden of $612.<5> The U.S. Center for
Disease Control and Prevention estimates that
smoking-caused health expenditures total $10.47 per pack
sold in the United States.<6> Since the inception of
California's Tobacco Control Program in 1989, the state has
successfully reduced smoking rates and cigarette
consumption, from 22% in 1988 to 12% in 2010,<7> saving the
state nearly $134 billion<8> and 429,360 fewer children
growing to be addicted adult smokers,<9> through tobacco
prevention, cessation programs, and law enforcement related
to the distribution and sale of cigarettes and other
tobacco products. Academic research supports California
-------------------------
<4> California Department of Public Health: Tobacco Control
Program. "Fact sheet: Health and Economic Consequences,"
2010. Available at:
http://www.cdph.ca.gov/programs/tobacco/Documents/CTCPHealth
EconCon_10.pdf
<5> Campaign for Tobacco Free Kids. "Smoking Caused Federal
& State Expenditures and Related Tax burdens on Each
State's Citizens." January 2012. Available at:
http://www.tobaccofreekids.org/research/factsheets/pdf/0096.
pdf
<6> CDC, "Annual Smoking-Attributable Mortality, Years of
Potential Life Lost, and Economic Costs -- United States
1997-2001." MMWR, July 1, 2005.
<7> African American Tobacco Control Leadership Council
Letter. 1 May 2013.
<8> Lightwood J, Glantz SA (2013) The Effect of the
California Tobacco Control Program on Smoking Prevalence,
Cigarette Consumption, and Healthcare Costs: 1989-2008.
PLoS ONE 8(2): e47145. doi:10.1371/journal.pone.0047145.
Available at:
http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjourna
l.pone.0047145
<9> Campaign for Tobacco-Free Kids, "Impact on Youth
Smoking, Deaths, and Related Health Costs from Changes to
California Tobacco Prevention Funding: Benefits and Savings
from Smoking Declines in California." 14 June 2010.
SB 768 -- 5/1/13 -- PageJ
Tobacco Control Program's success at changing social norms
to reduce smoking prevalence, and in turn, per capita
health care expenditures, but California has not raised its
cigarette tax since 1998. Inflation erodes the Tobacco
Control Program's purchasing power. Because cigarette
prices have failed to keep up with increases in the general
price level of goods and services, they may have become
more affordable relative to increases in income levels.12
California's current $0.87 per pack cigarette excise tax
ranks 33rd in the nation for tobacco tax rates -- a lower
rate than neighboring states: Washington, $3.025; Oregon,
$1.18, and Arizona, $2. SB 768 imposes an additional $2
excise tax per pack of cigarettes, a rate consistent with
the Centers for Disease Control and Prevention's
recommended tax increase per decade, and requires the BOE
to adjust the percentage increase in the Consumer Price
Index for all items annually. SB 768's revenues would
support proven and effective tobacco prevention and control
programs, fund tobacco law enforcement, and improve access
to health care.
2. Underground market . Taxes increase product prices, and
higher cigarette prices can exacerbate tax evasion and
foster illegal cigarette sales. These illegal activities
include increased smuggling of cigarettes and tobacco
products into California, and the sale of counterfeit
cigarette stamps and products. The California Cigarette
and Tobacco Products Licensing Act of 2003 (AB 71, J.
Horton, Chapter 890 of 2003) was enacted to address the
concerns of illegal sales. This Act established a
comprehensive licensing program for retailers,
manufacturers, distributors and importers of cigarettes and
tobacco products. According to BOE, the Act has been
successful in reducing illegal sales of cigarettes.
Opponents argue that the bill would "enhance
bootlegging by traveling to neighboring states [to]
purchase cigarettes" and would "enhance illegal sales when
wholesale and retail selling of cigarettes and tobacco
products face illegal sales?with counterfeit cigarette
stamps and products smuggled into the state without taxes
being paid."<10>
Proponents of this measure respond to the smuggling
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----------------------
<10> California Distributors Association Letter. 1 May
2013.
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argument, as follows:<11>
California has one of the most aggressive
enforcement programs, enacted by legislation six years
ago. California introduced a new high-tech tax stamp
and saw its cigarette tax revenues go up by roughly
$100 million in the following 20 months, with no rate
increase.
The smuggling/tax avoidance problem is a much
smaller than the cigarette companies and distributors
suggest. Smuggling and tax evasion should be the
worst in jurisdictions with the highest state-local
cigarette tax rates and the most established smuggling
and tax evasion infrastructures and customs (e.g.,
Chicago and New York City). In comparison, the vast
majority of states - with lower actual or proposed
cigarette tax rates and much less established
smuggling infrastructures or tax evasion patterns -
have little to worry about. But even in Chicago and
New York City, smuggling and tax evasion account for
only a relatively small minority of cigarette sales;
and each has gained substantial new revenues from
their cigarette tax increases.
Further, the BOE's Investigation Division actively
investigates and makes seizures of unstamped or counterfeit
stamped cigarettes and imports of domestic labeled
cigarettes or export type cigarettes stamped in violation
of the law.
3. Missing something ? SB 768 leaves blanks for how moneys
in the Tobacco Tax Fund are to be transferred and
allocated. The bill also remains silent on the allocation
to the California Department of Public Health, the
Department of Education, and the University of California
to supplement tobacco prevention and control programs. The
author intends to continue working with stakeholders to
determine the appropriate allocation.
4. CPI . The Hazardous Substance Tax and the Fire
Prevention Fee, both collected (but not enforced) by the
-------------------------
<11> Campaign for Tobacco-Free Kids, "Responses to
Misleading and Inaccurate Cigarette Company Arguments
Against State Cigarette Tax Increases."
SB 768 -- 5/1/13 -- PageM
BOE are adjusted based on the Consumer Price Index. Both
taxes pay for specific services, such as fire protection in
state regulated fire areas (SRA). No other tax or fee
administered and collected directly by a tax agency and
collected for a general purpose, however, is adjusted for
the cost of living increase. SB 768 creates a new
precedent in tax law whereby the taxes increases annually
to pay for the programs that by their nature should shrink
as demand for cigarettes increases. The CPI adjustment
creates uncertainty and difficulty for retailers, and
exacerbates the reliance of tobacco tax funds to continue
increasing the tobacco tax, even though their goal is to
stop smoking. Furthermore, as general policy, the rate,
base or computation of a tax should be a question of
Legislative oversight. The Committee may wish to consider
deleting the requirement that the tax is increased annually
for inflation.
5. Population perspective . 2005 data from the Centers for
Disease Control and Prevention demonstrates that 60% of
adult smokers have incomes above the 200% of the federal
poverty line.<12> But increases in tobacco prices affect
the behavior of the young and low-income, who tend to be
more responsive to price changes, than older and wealthier
individuals.<13> Higher tobacco taxes would encourage more
low-income smokers to quit. Since three out of every four
smokers expected to quit because of the tax increase would
be low-income,11 the public health benefits of reduced
tobacco-related illnesses from smoking will also be borne
by lower-income households. However, if individuals
considered to be low-income do not quit, it would be a
regressive tax because they would be spending more of their
income on the product.
-------------------------
<12> Center on Budget and Policy Priorities. "Expanding
Children's Health Insurance and Raising Federal Tobacco
Taxes Helps Low-Income Families." 2007 October 16.
Available at: http://www.cbpp.org/files/10-16-07health.pdf
<13> Guindon, G.E., Tobin, S., and D. Yach. "Trends and
affordability of cigarette prices: ample room for tax
increases and related health gains." Tobacco Control 2002;
11: 35-43.
SB 768 -- 5/1/13 -- PageN
6. Matching states . Across the 50 states and U.S.
territories, the median tax rate on cigarettes is $1.34 per
pack. California is one of three states, with Missouri and
North Dakota, which have not increased their cigarette tax
since 1998. Some local governments have their own
cigarette taxes, such as Chicago (68[), Cook County, IL
($3.00), New York City ($1.50), and Anchorage, AK ($2.206).
The following map and chart show the cigarette tax rates
across the nation and excise tax rankings.
Figure 1 : "Map of Cigarette Tax Rates," Campaign for
Tobacco-Free Kids, December 5, 2012. Available at:
http://www.tobaccofreekids.org/research/factsheets/pdf/0222.
pdf
Figure 2 : "State Cigarette Excise Tax Rates and Rankings,"
Campaign for Tobacco-Free Kids, December 13, 2012.
Available at:
http://www.tobaccofreekids.org/research/factsheets/pdf/0097.
pdf
7. Revenue-chaser . As fewer individuals purchase
cigarette or tobacco products for health or economic
reasons, incoming revenue declines. SB 768's additional $2
per pack tax may affect the other various propositions that
receive financial support from cigarette surtaxes.
However, proponents argue that an increased tax per pack
brings in more new revenue than what is lost by the
declines in the number of taxed packs. Analysts predict
that national pack sales decline about four to five
percent<14> per year, because of smokers quitting, cutting
back, or switching products, which makes tobacco revenues
relatively predictable and consistent for budgeting.
However, since the tax increase means fewer cigarettes
sold, is it necessary to backfill the specified funds,
since their mutual intent is to reduce cigarette
consumption? Proponents argue two things: First, cessation
programs provided by the funds have been invaluable in
stopping cigarette smoking. Second, as tobacco companies
spend approximately $8 billion in marketing and
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<14> Stadard & Poor's, Altria Group: Sub-Industry Outlook,
December 6, 2008.
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advertising<15>, based on Federal Trade Commission studies,
California needs a robust marketing campaign to combat
those dollars. The Tobacco Education & Research Oversight
Committee (TEROC), a legislatively mandated oversight
committee that monitors the use of Proposition 99 tobacco
tax revenue, noted that California's tobacco control
movement has become threatened by funding declines and
increased costs creating an "endangered investment" that
threatens past achievements and future progress in
addressing the nearly four million youth and adult smokers
in California.<16> The Committee may wish to consider an
alternative revenue source for these programs instead of
the over-reliance on a tax that is supposed to reduce
consumption.
8. Pass me one . On June 5, 2012, Proposition 29, the
"Tobacco Tax for Cancer Research Act," which would have
imposed an additional $1.00 tax per pack of cigarettes and
directed accompanying revenues to cancer research, smoking
reduction programs, and tobacco law enforcement, was
defeated -- 50.3% in opposition and 49.7% in support. The
"Yes on Proposition 29" campaign spent around $12.3 million
in advertising, and opponents spent around $46.8 million.
A March 2012 Public Policy Institute of California poll
found that nearly 67% of surveyed potential voters were
likely to vote in favor of Proposition 29.<17> But by
June, voters opposed the initiative -- albeit narrowly and
in a saturated advertising environment. Is there a clear
message from voters to the Legislature?
9. More approaches . Reducing smoking prevalence among
current smokers and incidence in new smokers involves a
social norm change and a policy approach that provides
prevention and cessation programs and rigorous law
-------------------------
<15> Federal Trade Commission Cigarette Report for
2009-2010. 2012. Available at:
http://www.ftc.gov/os/2012/09/120921cigarettereport.pdf
<16>
http://www.cdph.ca.gov/services/boards/teroc/Documents/TEROC
MasterPlanExcSum09-11.pdf
<17> PPIC Statewide Survey. "Californians and their
government." March 2012. Available at:
http://www.ppic.org/content/pubs/survey/S_312MBS.pdf
SB 768 -- 5/1/13 -- PageP
enforcement. While the bill's goal is to increase revenue
for state coffers and decrease cigarette consumption, local
land-use policy and additional youth interventions may help
achieve the maximum goals. Since 2004, there has been a
ban on smoking within 20 feet of a public building (AB 846,
Vargas). Cities, like Berkeley and Hermosa Beach, have
adopted smoke-free restaurant laws for outdoor dining
areas. Other cities, like Glendale, have also adopted laws
regulating smoking in private multi-family buildings.
Local governments may analyze zoning density or the number
of tobacco retailers near schools or playgrounds. In
addition, California could increase the smoking age to
21,<18> which would limit the ability of youth to acquire
tobacco products through similar-aged peers.
10. Binding the future . SB 768 prohibits the funds from
transfer, appropriation, or reversion by the Legislature,
the Governor, the Director of Finance, or the Controller
for any other purposes not specified in the bill. However,
no legislation may bind a future Legislature's actions.
The bill also authorizes funds in the Tobacco Tax Act Fund
to be placed into the Pooled Money Investment Account
(PMIA). It is unclear whether the bill intends to have
those funds as part of the Surplus Money Investment Fund in
the PMIA. Approval to participate in SMIF must come from
the Pooled Money Investment Board, and funds in SMIF can be
borrowed by the General Fund. The Committee may wish to
consider deleting this provision.
11. Double-referral . The Senate Rules Committee ordered a
double-referral of SB 768 to the Senate Governance and
Finance Committee, which will consider the bills' excise
tax provisions, and to the Senate Health Committee, which
has jurisdiction over public health measures. The bill is
set to be heard in Senate Health Committee on May 8, 2013.
12. Related legislation . SB 768 is not the first bill
seeking to increase the tax rate on cigarette and tobacco
products.
SB 600 (Padilla, 2009) imposed a $1.50 increase per
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<18> Ahmad, S. and J. Billimek. "Limiting youth access to
tobacco: Comparing the long-term health impacts of
increasing cigarette excise taxes and raising the legal
smoking age to 21 in the United States." Health Policy 80
(2007) 378-391.
SB 768 -- 5/1/13 -- PageQ
one pack of 20 cigarettes. The bill passed the Senate
Health, Senate Revenue and Taxation, and Senate
Appropriations Committee. It was later held in Senate
Rules.
AB 89 (Torklakson, 2009) imposed an additional tax,
at a rate of $2.10 per one pack of 20 cigarettes, and
deposited revenues into a Tobacco Excise Tax Account.
The bill was not heard in the Assembly Governmental
Organization Committee.
SB 564 (Torlakson, 2004) imposed an additional tax
on the distribution of cigarettes at the rate of $2.00
per each package of cigarettes. This bill was held in
the Senate Revenue and Taxation Committee.
AB 35 (Vargas, 2003) imposed an additional tax on
the distribution of cigarettes at the rate of $1.50
per each package of cigarettes. The bill was later
amended to a different subject.
SB 1890 (Ortiz, 2002) increased the cigarette tax
by 65 cents per package with the proceeds to have been
used for health-related programs. The bill was held
in the Senate Revenue and Taxation Committee's
suspense file.
Support and Opposition (5/2/13)
Support : American Lung Association in California; American
Cancer Society Cancer Action Network Inc.; American Heart
Association; Asian and Pacific Island American Health
Forum; Association of Northern California Oncologists;
African American Tobacco Control Leadership Council;
California Black Health Network; California Council of
Churches IMPACT; California Medical Association; California
Pan-Ethnic Health Network; California Primary Care
Association; California Public Health Association; Campaign
for Tobacco-Free Kids; Cancer Prevention Institute of
California; ChangeLab Solutions; The Coalition for a
Tobacco-Free San Bernardino County; Communities against
Substance Abuse; Consumers Union; Health Access California;
Health and Social Policy Institute; March of Dimes
California Chapter; Medical Oncology Association of
Southern California, Inc.; Operation Samahan; San Diego
Regional Asthma Coalition; San Luis Obispo County Tobacco
Control Coalition; SEIU California; Smoking &Tobacco
Outreach/Prevention Program (STOPP); SUNSET Russian Tobacco
Education Project.
SB 768 -- 5/1/13 -- PageR
Opposition : California Chamber of Commerce; California
Distributors Association; California Taxpayers Association;
Reynolds American, Inc.