It is no secret that smoking kills people. But on top of being the single largest cause of preventable death in California, it is exacting an enormous toll on our state’s economic health. This is why some of California’s largest and most influential business groups are doing something we don’t typically see: supporting a tax increase.
Twenty business groups, representing every single major metropolitan area of California, support Prop 56.
They include the Bay Area Council, the Los Angeles Chamber of Commerce, the Los Angeles County Business Federation (BizFed), Valley Industry and Commerce Association (VICA), San Gabriel Valley Economic Partnership, the San Diego Regional Chamber of Commerce, and the Silicon Valley Leadership Group. The California Chamber of Commerce, a major opponent of a 2012 tobacco tax proposal in California, will not take a position on Prop 56 – essentially taking a stand with its decision to sit this one out.
Prop 56, which will increase California’s cigarette tax by $2 per pack, with an equivalent increase on products containing nicotine derived from tobacco, including e-cigarettes.
Tobacco has a profound negative impact on California’s economy to the tune of $20 billion in lost productivity, premature mortality and increased healthcare costs.
Business leaders and employers also are embracing and even leading anti-smoking efforts because they see the toll it takes on their employees and on their bottom line. Each employee who smokes costs businesses $6,398 per year. This is the result of poor health, higher healthcare costs, more frequent absences from work, and lower productivity due to nicotine addiction.
Meanwhile, whether they smoke or not, Californians taxpayers spend $3.5 billion dollars each year alone treating cancer and other tobacco-related diseases through the state’s Medicaid program, Medi-Cal. Prop 56 will help defray these costs. The vast majority of funds — estimated up to $1 billion annually with an additional $1 billion in federal matching funds – generated by Prop 56 will go to health care through Medi-Cal. Medi-Cal now serves half of all California children.
Boosting Medi-Cal spending generates new jobs and tax revenue for the state. Medi-Cal coverage also creates $1.7 billion in increased personal income for Californians every year through improving the productivity of the 3.5 million workers who rely on the program. Reducing avoidable healthcare costs such as those generated by smoking will stretch the state’s healthcare dollars further and reduce long-term costs for taxpayers.
Each year, nearly 17,000 California kids start smoking. One-third of them will eventually die from tobacco-related disease. Prop 56 will save lives by helping prevent a new generation of kids from taking up this deadly, costly habit. The US Surgeon General says that increasing tobacco taxes reduces youth smoking. In every other state that has significantly raised cigarette taxes, smoking rates have gone down.
The tobacco industry has spent more than $66 million fighting Prop 56. Nearly every major newspaper in California has endorsed Proposition 56, and editorial boards have unanimously discredited the main claims in anti-Prop 56 ads.
Though we have made important strides in reducing smoking, the rising use of e-cigarettes among youth threatens an entire new generation. Since smoking is a habit which typically begins in youth, this impact of higher taxes pays dividends in terms of curbing smoking and its costs in the long run.
Tobacco’s price tag also affect millions of Californians who purchase private health insurance as small business employees or as individuals.
Since the launch of the Affordable Care Act, six states, including California, prohibit the charge of additional premiums for tobacco use. This increases the likelihood that they will purchase health insurance coverage, which is a good thing. But it increases the urgency of continuing to reduce smoking in this pool of insured Californians, in order to minimize the impact of smoking-related costs on overall premium increases for families and small businesses.
The bottom line is that promoting smoking cessation through a higher cigarette tax will have a positive impact on California’s economy, and Prop 56 will provide an even bigger boost by directing revenues to Medi-Cal.
But by far, the most important thing that Prop 56 will do is save lives by protecting children from deadly addiction and improving the health of our citizens.
Micah Weinberg, PhD is the President of Economic Institute at the Bay Area Council and produced the current estimates of the business impacts of smoking referred to in this piece.