Analysis of Proposition 28: Repeal of Proposition 10 Tobacco Surtax Initiative Statute

Proposition 28, titled the Repeal of Proposition 10 Tobacco Surtax Initiative Statute, would repeal the $.50 tax per pack of cigarettes (and commensurate tax on other tobacco products) enacted on by Proposition 10, passed on November 3, 1998. Proposition 28 would dismantle the California Children and Families First Program, a statewide trust to fund programs for early childhood education, also enacted through Proposition 10. It also prohibits the passage of additional taxes on tobacco products by voter mandate. People are sensitive to the price of cigarettes and other tobacco products. Imposition of the 50 cent tax by Proposition 10 (combined with a wholesale price increase imposed by the tobacco industry to pay for the Master Settlement Agreement that ended state tobacco litigation) substantially reduced cigarette consumption. Repealing the tax could substantially increase cigarette consumption and associated disease and medical costs if the price of cigarettes drops. We analyzed two scenarios, which bracket the likely effects if Proposition 28 passes: 1. The tobacco industry raises wholesale prices to increase industry revenues. • Since there is no retail price change, there will be no changes in consumption or tobacco-related disease. • Industry revenues would increase by $617 million. 2. The tobacco industry does not change wholesale prices, so the retail price of cigarettes drops and consumption increases. • There would be an additional 114 million packs of cigarettes consumed, increasing industry revenues by $220 million. • There would be an increase in teen smoking, between 7,800 and 46,500 new youth smokers. • An additional 102 low birth weights due to maternal smoking, for an additional $2 million in direct medical costs for the first year following the repeal of the tax. • An additional combined total of 78 heart attacks and strokes for Californians over 35 years of age for an increase of $3 million in direct medical costs for the first year following the repeal of the tax. • Over the longer term, annual medical costs of smoking-induced disease will increase by $500 million annually, with an additional 1,800 annual deaths due to active smoking. • Increase in costs for diseases related to secondhand smoke, especially in childhood diseases caused or exacerbated by secondhand smoke including SIDS, middle ear infections, asthma, bronchitis, pneumonia, and lung cancer, including • 50 to 90 additional low birth weight infants • 5 additional cases of SIDS • 3,400-8,100 additional physician office visits for middle ear infections • 40 to 135 new asthma cases in children • 2,000 to 5,200 additional asthma attacks in children • 780 to 1,600 cases of bronchitis and pneumonia in children • 16 additional lung cancer deaths • 180 to 320 additional heart disease deaths These two cases bracket the likely effects of enactment of Proposition 28. The actual effect will probably be somewhere between these two scenarios.