Philip Morris keeps trying to undermine California’s tobacco tax

Hello again from the Lounge, especially to all of our new readers from India.

Big Tobacco twice succeeded, spending tens of millions of dollars in the process, in having  cigarette tax increase measures beaten back in California. The industry also for many years had successfully lobbied the California State Legislature from increasing cigarette taxes. Well, in November 2016, Big Tobacco finally lost, as Californians passed a whopping $2 a pack increase by a large margin.

That jacked up California’s cigarette tax from 87 cents a pack — one of the lowest in the nation — to $2.87 a pack, one of the highest in the nation.

Big Tobacco REALLY cared about California, which at first I thought was a little weird because California had a pretty low smoking rate even before the tax increase. Then, I thought about it … while California has one of the lowest smoking rates in the nation, it also still has 38 million people, so 10 percent of say 30 million smoking-age residents of California, is still 3 million smokers, spending an average of say $1,000 a year on their habit, which adds up to $3 billion a year.

Then, I saw why Big Tobacco was willing to spend tens of millions to defeat tax increases in California, because everyone knows higher tobacco taxes are one of the most effective ways to encourage people to quit — and to encourage teens not to start to begin with. Big Tobacco  spent a staggering $71 million to try and defeat the 2016 measure. Their effort finally failed.

Well, Philip Morris is trying a new (actually, not so new) tact to undermine California’s cigarette tax increase … discount coupons to smokers in California.

Again, with $3 billion in revenue at stake, it’s worth Big Tobacco’s while to take a bit of a bath on discounts.

From a New York Times article:

“The hope is that by buffering the price shock, fewer people will quit,” said Stanton Glantz, a professor of medicine at U.C. San Francisco whose research focuses on tobacco.

 In 2014, the tobacco industry spent more than $5 billion — nearly two-thirds of its entire marketing budget — on discounts passed along to consumers, according to a government report.

At $2.87 a pack, the cigarette tax threatens to further erode (California’s) customer base. Reports have suggested that some smokers have already quit.

Cigarette taxes play a “huge” role in smoking rates, said Ilana Knopf, director of the Public Health and Tobacco Policy Center at Northeastern University Law School in Boston.

“And of course the industry knows that,” she said, “so they do whatever they can to counter those policies.”

In the short term, it might work a bit, but in the long run, Big Tobacco will have to give up on California, where the smoking rate will surely drop because people won’t want to pay $2.87 a pack.

Sacramento Bee editorial on tobacco taxes

This editorial printed this week suggests that the $1 billion a year expected to be generated from California’s cigarette tax could balance some of the cuts the state might see from Republicans in D.C. trying to cut federal funding for health care.

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