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Reason Foundation

Proposition 29 - A Cigarette Tax with Good Intentions But Disastrous Methods

Why California voters should think twice before voting in favor of this ballot initiative

Adrian Moore
May 24, 2012

On June 5 California will vote on Proposition 29, the Tobacco Tax for Cancer Research Act.  The initiative would increase the state excise tax on cigarettes by $1 per pack and is expected to raise about $810 million a year. That money would be divided mostly among existing cigarette tax funded programs, smoking cessation programs administered by the Departments of Public Health and Education, and 60 percent (about $480 million) would go to a cancer research fund.  A nine-member committee will be established to administer the program and award funds, including cancer research grants.

We all want to see cancer defeated and love the idea of more cancer research. But the flaws in Proposition 29 are many and deep. When even the cigarette tax loving Los Angeles Times says, "NO on Prop. 29," you know something must be wrong with it.

Below are just a few major problems with Prop 29.

First, the money from this new tax can be spent anywhere on just about anything. Why tax Californians to pay for cancer research in other states when the federal government already provides billions in cancer research funding?  And more importantly, if Sacramento, Calif. thinks California needs more cancer research, why doesn't it just allocate more of the budget to the University of California cancer research centers like the UC Davis Comprehensive Cancer Center, the UC San Francisco Helen Diller Family Comprehensive Cancer Center, the UCLA Jonsson Comprehensive Cancer Center, and the UC San Diego Moores Cancer Center? Surely that would be the way to leverage existing cancer research in California.

Second, there is just no accountability in Prop 29 for how the money is used. Members of the committee have extreme discretion in how the money is spent. There is no requirement that it develop a strategic plan or performance measures so that taxpayers know what the money is supposed to accomplish and if it is working.  Nor is there any external oversight, even by the legislature, of how the money is used. Worst of all, grants can go to organizations that employ members of the committee.

Gee, can't you just imagine the waste and the conflicts of interest? Oh wait, you don't have to imagine it, we've seen plenty of it before.

California passed a cigarette tax to fund First 5 over a decade ago, and that program has been plagued by wasteful spending and scandals (see here, here and here). But California didn't learn from that and passed another initiative that directed the state to create an agency to fund stem cell research.  And sure enough mismanagement of funds and scandal followed that, too (see here and here).

Third, it's possible this tax won't raise the money proponents say it will. Maryland raised its cigarette taxes and only got half the revenue it expected. In other places, like New Jersey and Washington D.C., revenues have fallen short or declined. In fact, a good chunk of the Prop 29 tax is already dedicated to backfilling programs funded with existing cigarette taxes that are suffering due to falling revenue.  When revenues from Prop 29 fall, where will the money to backfill it come from?

Given all the new tax proposals Californians will be voting on in November, does the state really want to pass this tax now? Does California really want to raise taxes, even just on smokers, to fund a new, completely unaccountable bureaucracy at a time when the state is facing its biggest budget crisis ever? It's something to think about.

Adrian Moore, Ph.D., is vice president of policy at Reason Foundation.


Adrian Moore is Vice President, Policy


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