AdWatch monitors the factual accuracy of ballot measure TV advertising.
ADWATCH ANALYSIS
This “No on 86” ad says that only ten percent of Prop. 86 revenues would go to anti-smoking programs, and that the measure would increase tobacco smuggling and crime and deny schools more than $800 million in tax dollars. The ad contains accurate statements but omits important details.
What the ad says:
[Announcer]: “I am a doctor who wants people to stop smoking. But that’s not what Prop. 86 is all about. Only ten percent of the cigarette tax goes to anti-smoking programs. And 86 will increase tobacco smuggling and crime. That’s why law enforcement groups across the state oppose 86. Teachers and educators oppose Prop. 86 too because it rewrites the state Constitution, denying our schools more than $800 million other tax dollars. Prop. 86 is not what it claims. Read the facts yourself. No on 86.”
Statement: “Only ten percent of the cigarette tax goes to anti-smoking programs.”
Analysis: This is debatable.
Opponents’ ten-percent figure is based on how much Prop. 86 would allocate directly to smoking prevention and cessation programs. The programs, which would receive slightly more than ten percent of Prop. 86 revenues, include:
- A tobacco control media campaign (2.85 percent),
- Tobacco control competitive grants (1.9 percent),
- Local health department tobacco prevention (1.8 percent),
- Tobacco education (1.48 percent),
- Tobacco control enforcement (0.95 percent),
- Tobacco cessation (0.92 percent), and
- Tobacco control evaluation (0.21 percent).
Although it cannot be quantified, smoking prevention and cessation may also be supported less directly in funding for several other categories of services. See where Prop. 86 revenues would go.
Prop. 86 proponents argue that the tobacco tax itself would also reduce smoking. They cite a California Department of Health Services (DHS) analysis of Prop. 86, which concludes that the $2.60 tax hike under Prop. 86 would cause 500,000 smokers to quit and deter 700,000 children from smoking. The DHS analysis is based on findings from several major state and national studies and reports.
Statement: “And 86 will increase tobacco smuggling and crime.”
Analysis: This is probably accurate. Tobacco smuggling and tobacco tax evasion would likely increase as a result of the higher tobacco tax under Prop. 86.
Some smokers already evade California’s 87-cent per pack cigarette tax by buying cigarettes from lower-taxed or untaxed sources, such as neighboring states or Internet vendors. One 2002 study of California’s 50-cent tobacco tax increase in 1999 found that about five percent of smokers were evading cigarette taxes by purchasing from sources such as the Internet or out-of-state outlets.1
The 2002 study also concluded that smuggling and tax evasion probably increased after the 50-cent tobacco tax increase in 1999. Such activity would likely increase with the significantly larger $2.60 tobacco tax increase under Prop. 86. Indeed, according to the Legislative Analyst’s analysis of Prop. 86, the additional tax could cause an unknown number of smokers to “shift their purchases so taxes would not be collected on tobacco products, such as through Internet purchases or purchases of smuggled products.”
In addition to bootlegging and tobacco tax evasion by individual smokers, some organized crime networks distribute counterfeit cigarettes in the state and sell them below the taxed price according to a 2004 report by the state Attorney General. Economic theory suggests that such activity would become more profitable, and therefore increase, with the Prop. 86 tobacco tax.
Some of the growth in tobacco-related crime would be offset by increased funding for tobacco-related law enforcement, which Prop. 86 would also provide.
1 Emery, S, MM White, EA Gilpin, and JP Pierce. Was there significant tax evasion after the 1999 50 cent per pack tax increase in California? Tobacco Control 11, 2002: 130-4.
Statement: “…it rewrites the state Constitution, denying our schools more than $800 million other tax dollars.”
Analysis: This is true, but schools would not lose any of the funds they already receive.
Prop. 86 would change the state Constitution so that all revenues from the measure would go to specific health-related programs and services rather than making new funds available to schools. See where Prop. 86 revenues would go.
Since California voters approved Prop. 98 in 1988, the state Constitution has required that K-14 schools receive a certain amount of guaranteed funding from the state General Fund and local property tax revenues.
Prop. 86 would raise the state tobacco tax by $2.60 per pack. If the revenues from this tax went into the state General Fund, then a portion would have to go to K-14 schools. (“More than $800 million” is probably a reasonable estimate.)
However, the initiative would create new state accounts for all Prop. 86 revenues, so that none would go to the General Fund. Because these accounts would be separate from the General Fund, they would not face the Constitutional requirement that a certain amount be spent on education.
Very few education groups have announced their opposition to Prop. 86 as of late October, although a number individual school board members and teachers oppose it. The California State PTA, several First 5 (preschool) programs, and the Ojai Unified School District all support the measure.
Posted: 11.1.2006
Analysis done by the Center for Governmental Studies.
