Tobacco Tax Measure Likely Would Reduce Sales
Proposition 86 -- a measure on the November ballot that would increase the state cigarette tax by $2.60 to fund health programs -- could reduce cigarette sales by 312 million packs per year, according to an analysis by the Department of Health Service's Tobacco Control Section, BusinessWeek reports. The TCS analysis also estimates that the measure would reduce smoking rates among high school students to 7.6% from 13.2% in 2004.
The proposition so far has spurred tobacco companies to launch a $7 million advertising campaign, which claims the proposal includes unnecessary antitrust exemptions for hospital corporations that helped write the measure. Cigarette makers also criticize the proposition because it does not require all revenue from the measure to be spent on smoking cessation programs or treatment of smoking-related illness.
Fredrick McConnell, a spokesperson for R.J. Reynolds Tobacco, said untaxed, counterfeit cigarettes and consumers who buy cigarettes from other states will lead to a reduction of the $1 billion the state currently receives annually from the 1998 Master Settlement Agreement.
Proponents of the measure say it will generate $2 billion in new tax revenue and reduce health care costs by $16.5 billion over time.
Citigroup analyst Bonnie Herzog said she expects the proposition to pass (Byrnes, BusinessWeek, 9/11).