Most Californians clamor for a tobacco tax increase

Posted Jul 8th 2009 3:10PM by Beth Gaston Moon
Filed under: Rumors, Consumer Experience, Altria Group (MO), Recession, Financial Crisis

Ahhh ... California. Home of the Beach Boys, Napa Valley, and, just recently, IOUs. Indeed, the Golden State is in dire financial straits, and looking for any way out. One suggestion? Tax the smokers. A recent poll of state voters shows 70% in favor of a $1.50-per-pack increase in the state cigarette tax.

Breaking down the numbers across party lines, 78% of Democrats, 75% of independents, and 65% of Republicans approve of such a measure. But Republican leadership remains opposed to the idea. A spokeswoman told reporters "Tax increases aren't the answer. Neither is tying programs with increasing costs to a tax source that is declining."

This wouldn't undo the state's $26 billion budget deficit, but it would be a quick way to put money into the troubled region's coffers. In fact, American Lung Association vice president Paul Knepprath argues that said tax increase would bring in about $1.2 billion each year, 85% of which would go into California's General Fund and the balance of which would support tobacco-prevention initiatives and lung-cancer research.

But with so much public support, could this measure pass one day? And if so, who suffers? Likely not so much tobacco companies - Philip Morris International Inc. (NYSE: PM), Altria Group, Inc. (NYSE: MO), Reynolds American, Inc. (NYSE: RAI), and Lorillard Inc. (NYSE: LO) - as the individual who has to suck up the extra charge before sucking down his morning cigarette. Does the extra expense coerce people into quitting? Typically no ... they just move to cheaper brands.

Beth works for The Options News Network (www.ONN.tv), which provides daily options commentary. The above comments are not intended as trading advice.

Tags: california, inthenews, ious, tobacco, tobacco tax, TobaccoTax

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Reader Comments (Page 1 of 1)

7-08-2009 @ 11:53PM

clikdawg said...

"In fact, American Lung Association vice president Paul Knepprath argues that said tax increase would bring in about $1.2 billion each year, 85% of which would go into California's General Fund and the balance of which would support tobacco-prevention initiatives and lung-cancer research."

Sure. Like all that Lottery money the states always say will go into education ... except that somehow it never really does.

What it goes into is the same pockets it always goes into -- and rank-and-file Californians will not be one red cent the better off.

They will, however, have had he cathartic experience of Imposing Their Will On Somebody Else, as well as that Self-Righteous Glow that makes life O! so worth living ...