Most Californians clamor for a tobacco tax increase


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.

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