By Samantha Arnerich
Copyright © 2000 by University of the McGeorge School of Law
JD, McGeorge School of Law, University of the Pacific
to be conferred 2001
B.A., History, UC Berkeley, 1998
Table of Contents
Smoking and its effects have become a highly debated topic in California’s political arena. California’s voters and legislators have passed many laws regulating smoking and taxing its sale within the state. The most current taxation on tobacco products is Proposition 10: The California Children and Families First Initiative. Passed in November of 1998, Proposition 10 placed an additional fifty-cent surtax on all tobacco products sold in California. Only a year later, Proposition 28 was placed on the ballot to repeal the Proposition 10 tobacco surtax. Proposition 28 not only seeks to repeal Proposition 10's tobacco surtax, but would also take away the citizens’ voting power to place additional taxes on tobacco products, reserving such power strictly to the Legislature. This review looks at the current state of the law under Proposition 10 as well as the proposed changes of Proposition 28. Further, this review analyzes the pros and cons of Proposition 28, and finally, its constitutionality.
A. Current Law
In the late 1980’s the voters of California passed Proposition 99 placing a tax on tobacco products sold in the state. A portion of the revenue collected under Proposition 99 funded an anti-tobacco campaign in California. Since Proposition 99's surtax went into effect, the consumption of tobacco products has steadily decreased in California, while the national consumption rate has increased over the same period. (KCRA 3 news, 4:30 edition (Nov. 5, 1999) (on file with the California Initiative Review.) Passed by the voters of California in November of 1998, Proposition 10 places an additional fifty cents-per-pack tax on tobacco products sold in the state. (California Online Voter’s Guide - 1998 General Election (visited Jan. 10, 2000) http://www.calvoter.org/98general/measures/prop10.html>.)
Proposition 10 initiated an additional tobacco tax to fund its creation of the California Children and Families First Program. This program was created:
for the purposes of promoting, supporting, and improving the early development of children from the prenatal stage to five years of age. These purposes shall be accomplished through the establishment, institution, and coordination of appropriate standards, resources, and integrated and comprehensive programs emphasizing community awareness, education, nurturing, child care, social services, health care, and research.
(Cal. Health & Safety Code §130100 (West 1999).)
Currently, the funds collected under Proposition 10 are distributed among several programs in the state. Among these are county commissions established by Proposition 10 to promote early childhood development. Eighty percent of the funds from Proposition 10 is allocated to these commissions. The remaining 20% is distributed to statewide programs, to partially replace a percentage of revenue lost by Proposition 99 due to decreased consumption of tobacco products in the state because of the new tax.
B. Proposed Changes
1. Revenue and Taxation Code
Proposition 28 will amend California Revenue and Taxation Code Section 30131.2 eliminating the "additional surtax on the distribution of cigarettes or tobacco products unless adopted by a statute passed by the Legislature." Proposition 28 also provides that all money collected thus far for funding the Children and Families First Trust Fund will be used until depleted, and the Trust Fund will then be terminated. (Repeal of Proposition 10 Tobacco Surtax Initiative, California Voter Pamphlet, p. 145 (2000).)
2. Health and Safety Code
Proposition 28 will also add Section 130105.1 to the Health and Safety Code. This section mirrors the language of the Revenue and Taxation Code section to be added by Proposition 28, stating: "[a]fter all monies collected pursuant to Section 30131.2 of the Revenue and Taxation Code, and appropriated pursuant to Section 130105 are depleted, the California Children and Families First Trust Fund shall be terminated." (Voter Pamphlet, at 146.)
In summary, Proposition 28 seeks to change all that is done under Proposition 10. If passed, it will repeal the tax, which among other things, funds the California Children and Families First Trust Fund. This would result in the Trust Fund’s termination once the money previously collected under Proposition 10 has been spent. Also, the voters of California will no longer be able to propose initiatives to place any additional surtaxes on tobacco products. The power to tax tobacco will be vested in the California Legislature and the federal government.
If passed, Proposition 28 will benefit consumers who will pay less for tobacco products sold in the state. The projected reduction by Proposition 10 of the "special tax money for certain health and resources programs" will be reversed because as the price for tobacco products decreases, the sales of these products increase, leading to more revenue being collected by the other taxes on tobacco products. (See Voter Pamphlet, at 75.) By getting rid of the tax imposed by Proposition 10, consumers would be given a break from the rapidly increasing prices of tobacco products due to the $206 billion tobacco settlement between the tobacco industry and thirty-six states, including California. (State Sees Cigarette Sales Plummet 30% Since Jan 1, Chicago Tribune, Sept. 14, 1999, at 9; 1999 WL No. 2911724.) By repealing this tax, California’s purchasers of tobacco products will no longer be taxed at a disproportionate rate to other members of the population. (Cheaper Cigarettes and the Committee to Repeal Proposition 10, Repeal Prop 10, (visited Jan. 10, 2000) http://repealprop10.com/index.html (on file with California Initiative Review.)
Revenue raised by Proposition 10’s tobacco surtax for early childhood development programs will be eliminated. (See Voter Pamphlet, at 75.) Proposition 10’s opponents claim that the tax imposed by Proposition 10 has been associated with decreased sales of tobacco products by 30% in the state. If Proposition 10 is repealed, consumption could be expected to rise again. (State Sees Cigarette Sales Plummet 30% Since Jan 1, Chicago Tribune, Sept. 14, 1999, at 9; 1999 WL No. 2911724.) Because research has indicated that smoking can lead to severe health problems, increased tobacco consumption could lead to higher health care costs. (The American Cancer Society, Tobacco Information (visited Jan. 10, 2000) http://cancer.org/tobacco/main.html (on file with the California Initiative Review.)
If it passes, Proposition 28 will repeal the Proposition 10 cigarette surtax. The surtax created by Proposition 10 could be seen as just another tax imposed on consumers who are already paying more for tobacco products than are citizens of other states. Conversely, opponents assert that if tobacco usage declines because of Proposition 10’s surtax on tobacco, society’s interest in protecting the health of the population is furthered.