California’s tobacco taxes

… are way too low.

Just bought some stuff at the local CVS and noticed that brand-name cigarettes were a little more than $5 a pack, which is barely above Virginia/North Carolina prices. An additional $1 per pack (on top of the current 87 cents) – which would put California roughly at the national median – that would yield about $800 million per year in new revenue (after adjusting for reduced consumption due to higher prices). That would (for example) allow the state allocation to University of California budget to get most of the way back to its pre-Crash levels, which would be adequate to prevent the otherwise-inevitable slide into mediocrity.

The reduction in smoking would have noticeable health benefits. Assuming that an additional dollar in tax led to roughly a 20% increase in retail price and assuming a price-elasticity of demand of roughly -0.4 means an 8% decrease in smoking. If we take national annual cigarette-related mortality to be 430,000, the population of Californiate to be 12% of the national population, and the California smoking rate to be about 3/4 of the national average, we have, in steady state:

430,000 x .08 x .12 x .75 = just over 3,000 lives per year saved, plus reductions in non-fatal disease.Sounds like a pretty good package to me.

California has an unusually good system for collecting tobacco taxes, which ought to keep the evasion problem under control.

With solid Democratic majorities in the legislature and a Democratic governor, this ought to be doable, though I doubt they’d want to give UC any of the money. But if the tobacco lobby makes a legislative fix impossible, then how about an initiative for 2016?

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

40 thoughts on “California’s tobacco taxes”

  1. You might be able to get away with it, with the Sierras to protect you. Here in VA we make a LOT of money from Marylanders coming across the river to buy cigs. Gasoline, too. Geographic isolation – or a Customs bureaucracy – is necessary to be able to make this work.

    At one point VA was sending state troopers over to watch nice liquor stores in the District and note VA licenses, then nailing Virginians as they came across the border with their loot. Response: Virginians drove to and from the stores from DC offices at their lunch hours, then were lost in the crowd commuting home in the evening.

    1. We make states a lot bigger out here on the other side of the . . . well, okay, I’m on your side of the Mississippi at the moment by about a mile and a half, but you get my point.

  2. Mark:

    Great idea! I noticed while living in Cali that there tobacco taxes were surprisingly low, considering it is so anti-tobacco otherwise, and almost everything else was so high.

    I wonder if the same can be said of their alcohol taxes. I noticed that one of the few relatively cheap things you could get there was hard liquor, which could be discounted by sellers. I remember the big sales they would have for hard liquor at Albertson’s.

    At the retail level, liquor was fairly loosey-goosey regulated than in the Midwest, the latter you would consider to be friendlier to drinking…


  3. I’m curious as to why you are promoting a tax increase that would be more onerous for the poor than the rich. Why not a progressive tax increase?

    I know you think that you’re helping those poor people by making them pay more and making it harder for them to enjoy their vices, but have you asked the poor whether they want you to save them from themselves with your tough love?

    1. Since he’s suggesting a referendum, he’s by definition proposing that we ask them. I understand your confusion, though. California being a blue state, you see, the poor still get to vote.

      1. Since it’s a referendum, he’s by definition asking the people who bother to vote on it whether they want to impose it on the people who either don’t vote, or vote against it.

        Which is rather different from asking people if they want to impose it on themselves…

        1. Brett Bellmore on voter suppression in North Carolina:

          = = =
          Brett Bellmore says: July 27, 2013 at 6:47 am

          “If someone showed an ID as everyone will now have to do, why not allow same day registration and voting?”

          Because of a belief representative democracy isn’t enhanced by the votes of people who are so uninterested in the election that they can’t be bothered to register until somebody rounds them up and hauls them to a poll on election day? Because such people probably weren’t following or thinking about the candidates and issues, either, and represent the most ignorant segment of the electorate?

          Or maybe it’s just a matter of separating registration and conducting the election, to space out the work?

          Anyway, why not provide free taxi rides to the polls? Just how far do with have to go in accommodating the marginally motivated voters? And would you have any interest in accommodating them if they trended Republican, instead of Democratic?= = =

          1. That I don’t think people who can’t be bothered to vote should have much of a say in government is quite distinct from whether I would characterize you and I getting together and agreeing to tax some third person as “asking them” whether they wanted to be taxed. Asking them in the sense of giving them the opportunity to futily protest?

            It is quite important, I think, to be clear what you’re doing, especially when what you’re doing is imposing something on somebody else. You shouldn’t pretend it was their choice, just because you gave them some trivial input in the matter, which you will proceed to ignore.

          2. Brett,

            By your logic, no tax can ever be imposed with less than unanimous support from those being taxed.

          3. Brett,

            what you’re doing is imposing something on somebody else.

            Nonsense. Nothing is being imposed. It’s easy to avoid the tax. Just don’t smoke. It was my impression that libertarians are big on self-determination and so on. Is that idea inoperative when it comes to tobacco taxes?

        2. It’s pretty rich to support obstructing the voting rights of lower-income voters and then spin ’round and piously claim that voter initiatives are illegitimate because they don’t give enough voice to the disenfranchised.

          It’s frightfully clever. You’ve got us coming and going, don’t you?

          1. I said that they shouldn’t be characterized as asking the people who’d be subjected to them. I said nothing about illegitimate. Any time something is put up to a vote, the losing side is going to get subjected to what the winning side prefered. (Which is a pretty good reason for limiting the subjects that get put to a vote.) You don’t have to rub salt in the wound by pretending they agreed to it, just because they got a chance to say “NO!”, and get shouted down.

          2. Brett’s first fallacy is the idea that if you don’t hold a vote, no one gets subjected to anything. That’s a status quo bias that’s hard to top.

            His second fallacy is in ignoring that by participation in a democracy, you have implicitly agreed to the results. Asking the voters is a process thing, not a results thing.

          3. There are areas of life where it’s pretty much unavoidable that somebody is going to get somebody else’s choice imposed on them. Which side of the road are we going to drive on, for instance? Can’t each decide that for ourselves. In those areas, voting makes sense.

            Then there are areas of life where it’s perfectly feasible for people to each chose what they want for themselves. We both walk into a restaurant, I can order octopus salad with kimchi on the side, you can order a burger and fries. No need for us to vote, and both eat the same thing.

            Most subjects occupy a middle ground, where to a much larger extent than liberals like to admit, we have a choice about which way we organize things. Individual choice is as feasible as voting. And, for some deep psychological reason, liberals reliably reject the latter way of organizing things.

            You look at a market where different people chose to buy different things, and maybe some chose not to buy anything, and see chaos. You see all these people not making the choice YOU, in your infinite wisdom, think best. And so, to the extent you can, you push to organize things, like, say, insurance, so that any choice has to be exercised collectively. Even though there’s no particular reason things have to be organized that way.

            Democracy? Over-rated by far. Democracy is a reasonable way to decide subjects where everybody is stuck with the same choice in the end. If only because it should guarantee that it’s the minority who get screwed over, not the majority. (Or, at least, if the majority do get screwed over, it’s their own damn fault.)

            But it’s a terrible way to organize things where the possibility of individual choice exists. Democracy is better than tyranny, but it’s still far worse than freedom.

    2. Have the tobacco companies asked the poor about disproportionately advertising in their neighborhoods?

      1. So you’re actually conflating being subjected to additional advertisements with being subjected to additional taxes?

        Besides, the tobacco companies are organized to make a profit – it’s their job. I assumed that Mark had different motives when considering policy options. Am I wrong?

        1. Sorry didn’t mean to question corporate profits gained at the expense of the oppressed. Way to stand up for freedom, man.

  4. Booze taxes in California are very low because the state has a very big and politically powerful wine and distilled spirits industry. I have a recollection of some actual monks in robes who made and sold brandy showing up in Sacramento to lobby against a liquor tax increase.

    However, California does not have a tobacco growing industry.

  5. Might make sense to tie it to a tax referendum on soon-to-be-legal marijuana. Just to keep things in perspective, you know. If there’s a $10 increase in a carton of cigarettes, it’s going to be hard to justify a tax much higher than whatever would then be the total taxes of a carton of ciggies on an oz of reefer.

    Although I think side by side comparisons of marijuana to tobacco are even more fraught than such comparisons between marijuana and beer, there are some valid points of comparison that are informative. After all, tobacco kills people regularly. It wouldn’t make sense to have a higher tax on marijuana than on such a destructive substance as tobacco.

    1. So, how is it that smoking cigs is bad for you, but smoking mj is not? Is this true? Do we know if it’s true? I would guess there are more weirdo chemicals in ciggies than in mj, but you’ve still got smoke, which I thought meant particulates?

      1. Inhaling smoke isn’t healthy for the human species, including smoke from the fireplace. Depending on what all is in the smoke, it can be better or worse, but no reasonable person would say that the smoke itself is a good even in the best case.

      2. Well, one key distinction is that many nicotine-addicted smokers smoke at least a pack a day. I can’t imagine essentially anyone smoking that much pot.

      3. The majority of studies (and the most comprehensive studies) have shown no link between even heavy marijuana smoking and head, neck or lung cancer, including the largest study funded by NIDA and done through UCLA. On the other hand, the science is clear that cigarettes contribute significantly to lung cancer.

        1. Pete,
          Thanks for that. There are also some studies showing a definite cancer-inhibitive effect in the laboratory. I won’t make any claims about that, but it is suggestive.

          In any case, my point wasn’t that smoking marijuana is good for you or even harmless. The point was that tobacco taxes are relatively modest, not only in California, but nationally for a substance with such a load of health-negative baggage.

          I know one of the favorite themes here is how taxes should be used to encourage good social policy. On the face of that, I have no problem with the idea. But as with all things, moderation seems to be the name of the game. That’s flies in the face of proposals that suggest marijuana should remain priced near current blackmarket levels after legalization “for our good.” I think that’s taking things a considerable distance too far. My own position is there’s little reason for legal cannabis to be priced over an average of about $100/ounce, taxes included. Even that price point would seem to indicate tax rates far in excess of those on tobacco.

          True, taxes on tobacco should go up. And marijuana should be taxed at a reasonable rate. And home grow should be legal for a nominal annual licensing fee. But whether commonsense get translated into public policy, well, I’ll have to wait and see — and do my part along the way to make it so.

          Frankly, I’d bet the political winds are such that it would be highly unlikely to see the two issues tied together or perhaps even on the same ballot together. A s apolitical animal, I can understand lots of reasons why that’s so. But the comparison is interesting…

          1. Not really. Inhaling anything is bad for you, and you probably shouldn’t listen to Mr G anymore than Mr Marlboro. And the anticancer agents are found in the COMPONENTS of marijuana, likely canceled out when smoking it. I clicked “comments” because I was going to make a joke about having pro-MJ and anti-tobacco referenda on the ballot at the same time in 2016. But apparently some have deluded themselves to think that these 2 things wouldn’t be inconsistent at best.

          2. WTF,
            There’s bad and there’s bad. My only experience with tobacco was back when it was official government policy to encourage smoking by issuing ration cards to GIs and all their dependents for $1.28/CARTON ciggies (Note: not a pack, a carton). Now, I’ve tried a lot of drugs, mostly until I got my fill, so not dabbling. Tobacco is the worst in terms of getting cravings for years later. I think it took a decade to get over that when I wised up and quit after 3 months — so it wouldn’t interfere with my hash smoking.

            That said, who knows what the real story is with smoking reefer in terms of the health effects. There is no identifiable syndrome associated with it, like cancer, emphysema, heart disease, COPD…And if there was, don’t you think we’d be hearing the specifics of it shouted from the turrets of the anti-drug castles dotting the countryside still? Youbethca. All they can do is make vague noises about smoking being unhealthy. Who knows if the anti-cancer compounds are destroyed by smoking? The government sure isn’t interested in research and does a pretty good job of discouraging others from doing it — or we might know more.

            I certainly don’t see how linking tax proposals on two smoking behaviors is “deluded.” In fact, you seem to feel there’s a close association in health outcomes — or something — so why wouldn’t the public see it that way as they would compare tax proposals? I think it will be an interesting contrast and compare if that happens, with all sort of interesting public health angles.

            After all, if marijuana turns out to be nowhere near as bad for you as pot, then it would be good to get people to switch. I did and am probably better off for having dropped the one I did. Maybe a special strain of low-THC reefer will be developed that has great flavor and — NO buzz! — just for the crowd giving up the ciggies. We would be living in a more sane society, certainly not a more deluded one.

          3. Well, I was up writing a little late. The first sentence in that last paragraph should read:

            “After all, if marijuana turns out to be nowhere near as bad for you as _tobacco_, then it would be good to get people to switch. I did and am probably better off for having dropped the one I did.”

            Maybe e-Reefer will join e-Ciggies, too, for all I know? It would be great to have a rational conversation about marijuana that wasn’t skewed by fanatical drug war fundamentalism. I think we’re still a ways off from that, but it’s coming.

          4. This is one of many cases where the anti-science stance of some marijuana enthusiasts causes them to lose credibility in the public square. Rather than adopt 1950s-style RJ Reynolds propaganda about the health benefits of smoke, it would be better I think to be honest. Inhaling smoke is not good for the human body irrespective of cancer Irritation of the nasal passage and throat increase the risk of opportunistic infections, that’s why smokers get more colds/upper respiratory infections for example.

          5. Keith,
            I don’t think anyone is disputing that or alleging otherwise. Remember this isn’t 7th grade health ed. We’re talking about what adults do and the consequences, not some ideal situation where we tap our heels together and wish we were in smoke-free Kansas.

            Mark’s already enthused about e-ciggies. Now I realize that it’s a big leap from those (unverified by testing) devices and actually smoking cannabis (specific damages as equally unverified by testing as e-ciggies) instead of tobacco. More second-hand issues, etc and yes, sucking in burning stuff is not good. I should get a vape, but I like my bong.

            But if it turns out that smoking reefer is 90% less damaging than smoking tobacco, that’s a good thing to know. I know you can do the public health math. I don’t exactly expect the government to start promoting that with tobacco smokers, but I’d at least hope that it did nothing to impede that if my myhtical >0.5% THC tobacco substitute cannabis became a reality in a legal cannabis environment.

            Yechh, I’d never buy the stuff, but it would be a good thing if a lot of nicotine addicts did.

          6. I’ve got my doubts that a soporific and a stimulant will so readily substitute for users…

      4. For one thing, the tobacco plant has compounds in it which are directly cancer causing, even if not burnt. (Which is why chewing tobacco also causes cancer.) It’s a biological defense mechanism, chemical warfare against anything that would eat it. Even handling tobacco can be bad for your health, without consuming it.

        There aren’t a lot of plants that have that particular defense mechanism, and pot isn’t one of them.

        1. Interesting. I guess it was smart of the plant to be habit-forming at the same time. Darn those little suckers.

          1. Actually, nicotine is another defense mechanism. In more than minor quantities, (Such as if a bug tried to eat tobacco.) it’s an effective nerve toxin. Much the same is true of caffine, by the way.

            Humans routinely enjoy, in comparatively small quantities, consumtion of plants which are wildly toxic to the creatures which might otherwise consume them. We’ve got really good livers, as it happens.

  6. Mark

    You have previously said the following here

    The problem is the specific impoverishment of elderly cigarette addicts. For a two-pack-a-day smoker living on SSI, a 60-cent-per-pack tax increase would eat up about about 7% of the monthly benefit check. And the health benefits of quitting in old age may very well not be great enough to counterbalance the unpleasantness of quitting and the loss of what may be an important pleasure and comfort in an otherwise grim life.

    How would this policy differ — or have you changed your mind?

    1. Same problem. I’d offer the same solution I did back then: untaxed maintenance supplies for elderly poor smokers.

      What’s changed is the introduction of the (as yet untaxed) e-cigarette, which provides a lower-cost, lower-health-impact alternative to the traditional coffin nail. Anything that hastens the consumer migration to e-cigs serves the public interest.

  7. California has a good system for collecting taxes on cigarettes, but it still has a problem with other than cigarette tobacco product (because cigarettes get the sophisticated tax stamp). But since your analysis didn’t include other tobacco products that’s probably not big deal unless a lot of people start switching to roll your own cigarettes.

    California has high cigarette taxes, but those taxes are not high relative to other states due to increases in those other states in recent years. We led the way, and other states caught up and some passed us up. Let us be content with that and stop meddling in the lives of cigarette smokers. Can we move on to others… like fat people taxes maybe?

  8. Here’s the definitive map on state cigarette taxes:

    As you can see, CA has a lower tax rate than all its neighbors but Nevada. Mark is right to point out that the CA Board of Equalization monitors a cigarette tax-stamp system that uses unique serial codes and frequent inspections of all retailers. The result is a decrease in illicit sale of cigarettes by roughly 2/3 (depending on how you read the numbers) since implementation. So there goes most of the fear about interstate trafficking. The leaves as strong arguments against only the civil liberties issue, raised here by Pete and Brett, and the social equity issue, raised by Keith and Mark and for which Mark proffers a solution.

    Personally I’m much too bought into the idea of a legitimately paternal state and the obvious limits of human rationality — particularly while on nicotine — to buy into the civil liberties issue. The interesting question here is how to make a tobacco tax pass.

    1. Personally, I’m much too bought into the idea of regulators being human, to buy into the obvious limits of human rationality as a justification for one set of irrational humans imposing their decisions on another set.

Comments are closed.