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Cigarette Tax or Tax Restructuring: California’s Crooked Tax System

Joel Fox
Editor of Fox & Hounds and President of the Small Business Action Committee

Over the holiday period, a short piece appeared in the San Francisco Chronicle tying some big names to a new effort to raise taxes on cigarettes. According to the Chronicle, a one-dollar a pack tax would be levied with the money to help pay for the University of California and Cal State systems.

Terrible tax policy: Funding core, on-going services with a tax that is shrinking as cigarette smoking diminishes. What California needs is to restructure its tax system, not complicate it.

Spokesman for the effort is Democratic consultant Jason Kinney, one of the heavyweights in the top consulting firm, California Strategies. He told the Chronicle the plan had a number of backers, specifically naming Lt. Governor Gavin Newsom.

Funding universities with cigarette taxes likely would offend people on the left and the right. Are we encouraging cigarette smoking to help pay for students? Are students going to rely on a resource that is slowly disappearing as the cost of education rises?

One of the methods anti-cigarette advocates espouse to cut smoking is to raise taxes on cigarettes, making them too expensive to purchase. A tax increase on cigarettes could decrease that funding source more quickly.

Of course, there is no secret why proponents see cigarette taxes as a juicy target. It’s a tax on the “other guy” since fewer Californians smoke. A tax the rich argument prevailed in the last election because the greatest part of the tax increase fell on someone else. So why not find a tax that voters will support as long as most don’t pay it?

Following a strategy to raise taxes on “someone else” so as to fund ongoing, important state programs that benefit all, only leads to a more dysfunctional tax system. Now is the time to rework the tax system not to make it more complicated.

While some in the legislature want to tinker with the tax system, a number of outside groups hoped to pursue an overall tax restructuring this year. Whether they will be stymied by the tax changes approved by voters in the recent election is yet to be determined.

An old saying goes that looking for the easy way is what makes rivers and men crooked. Perhaps the same thought can be applied to California’s tax system.

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