California Tobacco Legislation Information

California Tobacco Legislation Information
As concerned tobacco retailers and consumers it is our duty to remain informed and vigilant over the laws and potential legislation that affect us as smokers. Please take the time to review the information and articles below. Come November, Californians will be asked to impose the biggest tax increase ever on tobacco products, a change that healthcare advocates believe will reduce cigarette consumption, but some officials think will increase cigarette smuggling and it will definitely raise prices on an already overtaxed tobacco industry. Let the lawmakers hear your voice and don't let them jam yet another package of laws down our throats while we remain silent.
Links United Pro Choice Smokers Rights Newsletter Links to Smokers Rights Groups The California Tobacco Tax Act of 2006 Click for important info regarding your rights as a smoker.
Dear California Members: I would like to take this opportunity to reiterate to all of you your Association’s position on challenging Proposition 86—The Tobacco Tax Act of 2006. As you are aware, Phillip Morris USA and R.J. Reynolds, and the Cigar Association of America (CAA) have committed considerable resources to challenge this excessive tax increase. Without the financial resources (totaling $50 million) of these groups, there would be no effective challenge in the State of California to this tax initiative. Your Association stands with Phillip Morris, RJ Reynolds, and CAA in this fight to ensure *one consistent, clear message* to be conveyed to *ALL registered voters—that Proposition 86 is the wrong solution. Prop. 86 is an unfair tax increase supported by special interests who are amending the state Constitution and statutes to benefit themselves. It’s a money grab by huge hospital corporations who will reap hundreds of millions of taxpayer dollars each year. In order to prevent confusion among the electorate, sending out a separate message unrelated to the central theme could undermine and prove detrimental to the tobacco industry’s efforts in the state. We cannot afford to send conflicting messages to the voters. This fight can only be won if we collectively stand together on one platform with one voice. In the next weeks, you will begin receiving Point of Sale (POS) materials and related collateral materials from the strong coalition for distribution to your customers in the stores. This will only be one of a total campaign to defeat Prop. 86. Please, take advantage of the help that has come to your State to protect your businesses. All of you by now should know my mantra that we must all hang together or we will all hang separately. Do not let this happen—let’s work together to defeat Prop. 86! I urge all of you to not abandon the strong coalition* that has come together to defeat Prop. 86.
8/14/2006 What we Our Petition for Writ of Mandate requesting that the Ballot Label and Ballot Title and Summary for Proposition 86 be amended to clarify the definition of other tobacco products and the impact that a $2.60 excise tax increase on a pack of cigarettes would have on other tobacco products was denied by the Judge: Honorable Gail D. Ohanesian late this morning after oral argument. Our attorney presented a very clear and convincing case in support of the changes, however, the Judge ruled against us. Therefore, the voters will not find the words cigars, pipe tobacco or any other tobacco products mentioned in the initiative, Ballot Label and/or Ballot Title and Summary. They will have to assume that the words other tobacco products mean the aforementioned words. It will be up to each and everyone of you to be sure your customers know exactly the impact of a $2.60 per pack excise tax increase on cigarettes will have on their cigars, pipe tobacco, etc. The coalition fighting Proposition 86 will have their hands full dealing with this among other issues during the campaign. Developments and materials from the coalition will be forthcoming. What we are doing tomorrow is sending a shot over the bow to alert the proponents of Proposition 86 that we are looking at their initiative very carefully in terms of a possible constitution challenge at a later day. The language in Proposition 86 is not specific in terms of its impacts on the new excise taxes that will be applied by the BOE to cigarettes and other tobacco products. It is silent in terms of the floor stock taxes that the BOE will decide after the November election. In fact, if Proposition 86 passes in November, the floor stock tax, which is on all product in distribution, will be $2.60 on each pack of cigarettes and small cigars, requiring tax stamps. That floor stock tax will be determined by everyone's inventory on 12:01 AM January 1, 2007. In addition, there will be a floor stock tax on all other tobacco products equivalent to at least 88% that is in distribution on 12:01 AM January 1, 2007. It will be up to the BOE to determine when those floor stock taxes will be due and payable. Based on prior experience with the BOE those floor stock taxes will be due and payable on February 15, 2007. The BOE will have great discretion in determining the other tobacco products excise tax. They could, in fact, determine that due to language in Proposition 99, a double tax could be applied to other tobacco products, similar to what they determined after Proposition 10 passed in 1998. Therefore, the excise tax rate on other tobacco products may not be calculated to be equivalent to the increase in the cigarette excise tax rate. Based on my reading of Proposition 86, the Proponents are providing the BOE with too much power in terms of the ultimate calculation of the other tobacco products excise tax rate should the initiative pass in November. If the initiative passes the excise tax rate will be $3.47 per pack of cigarettes, the highest in the country. And the other tobacco products tax rate will be 135%, if the BOE simply determines that the new rate should be equivalent to the new excise tax rate on cigarettes. At 135% this would create the highest other tobacco products tax in the country. Few, if any, of our retailers will be able to pay the floor stock tax. And few, if any, will be able to compete against their out-of-state competitors. Thus, I have called this Proposition the doomsday scenario for our retailers in California. This initiative read carefully creates a continuing appropriation of billions of dollars outside the exclusive control and management of our government. None of the money is subject to the normal budget process, which allows for checks and balances. In addition, it allows the proponents to spend money without the need for competitive bidding on contracts they may award for up to five (5) years, a violation of current state law. And, without going into further detail, this initiative changes our constitution with a simple majority rule something even our legislative and executive branches of government can simply not do. Enough for now. What I am trying to do here is to give you a sense of why tomorrow is so important to us. And further, that the days ahead could bring us to challenge Proposition 86 in its entirety. Regards, Charles J. Janigian Dear California Cigar Shop Owner, Please excuse this brief interruption. My name is Adam Hollman and I am a California cigar smoker. I, like you are absolutely terrified about the possibility of the passing of Prop 86 in the upcoming November election. I know that many of you are getting a few updates from CART and RTDA on the campaign against Prop 86, but I for one am not waiting for them to start the movement against this proposition. To that end, I have created a website to spread the No on 86 message. My website is http://www.86prop86.com (and also NoOn86.info). The website is a bit of a work in progress, but I wanted to share it with you early. If you have any constructive criticism, I would certainly appreciate it. I am not any sort of professional political person...I am a simply a cigar smoker who does not want to see the cigar shops in California disappear because of this terrible proposition. Also, in addition to the website, I have attached to this email a Word doc you can print out and cut up to help get the message out. My local shop has a bunch of these and is including one in the bag of every purchase made in the shop. Please see that the website has some downloadable information sheets you can print up and distribute for more information. Anyway, this isn't meant to be long winded, but I wanted to let you know that you are not alone and if we stick together and get the message out we can BEAT this! Take care, -Adam Hollman The potential impact of the Tobacco Tax Act of 2006 initiative, which will be on the November 2006 ballot, on the retail tobacconists of California could be catastrophic. The Tobacco Tax Act of 2006 initiative would increase the excise tax rate on cigars, pipe tobacco, roll-your-own cigarette tobacco and smokeless tobacco by at least 300% and calls for a floor stock tax on January 1, 2007 based on all inventory in the retail tobacconist's shops, which would be equivalent to the difference of the new tax rate and the existing tax rate, 46.76%, prior to the new tax rate should the Tobacco Tax Act of 2006 be approved by voters during the upcoming November elections. That equates to a floor stock tax of over 80%! Although the Tobacco Tax Act of 2006 has qualified for the November 2006 ballot it has not been assigned a Proposition number as yet. Yet, that has not stopped the proponents of Tobacco Tax Act of 2006, who are a well funded, sophisticated group of health advocates from starting to plant stories in the media about the effects of second hand smoke and the problems of youth access to tobacco. This is the prelude to a far greater media attack on our industry by the proponents which will be coming in the months ahead leading up to the November elections. It is interesting to note that only $227.8 million of the proposed tax increase on tobacco products of $2.6 billion would be allocated for tobacco control and prevention programs. The majority of the funds will be used for hospital emergency room care, nursing education, community clinics, emergency physicians, children's health insurance, medical research, and backfill Proposition 10, our favorite subject. Yet their message to the voters will be all about reducing smoking, especially among kids, to sell this initiative, not necessarily the true use of the proceeds. And they will never mention the impact of the proposed new tax on cigar and pipe smokers, nor the retail tobacconists who will carry the heaviest burden. We will have a speaker from the campaign against this new initiative at our July 7 and July 13 events to educate you and your customers on what will be done to fight this new initiative. It is imperative to attend either event to learn first hand what is being planned by the coalition to stop the Tobacco Act of 2006. The cigar manufacturers in the Dominican Republic known as ProCigar, are not only concerned about this new initiative, but are taking an active roll against this initiative by participating in our events on July 7th and July 13th. Let us show them that we are as concerned about our businesses as they are about us by attending these events. SACRAMENTO Full audit ordered of commission Rob Reiner headed - John Wildermuth, Chronicle Political Writer Thursday, March 9, 2006 A state commission that until last month was led by actor-director Rob Reiner will face a full-scale audit into allegations it used government money to promote Proposition 82, the universal preschool initiative Reiner campaigned to place on the June ballot. Democratic and Republican lawmakers ordered the audit of the First 5 California Children and Families Commission in the wake of reports that the group, which is charged with helping California's youngest children and their parents, spent $23 million on a television ad campaign extolling the benefits of preschool as Reiner, the group's chairman, was collecting signatures for his initiative. Assemblyman Dario Frommer, D-Los Feliz (Los Angeles County), joined state Sen. Dave Cox, R-Fair Oaks (Sacramento County), in asking the Joint Legislative Audit Committee for the review of First 5. "It's very important for us to make sure this commission is properly spending money it is accounted for ... and there is no collusion between a state agency and a political campaign for purposes of passing an initiative,'' Frommer said. There are also concerns that the commission used no-bid contracts to hire consultants close to Reiner and paid out public funds to people working on Reiner's Prop. 82 campaign. Both Reiner and representatives of First 5 have denied any wrongdoing and said they welcome the audit. In a letter to the committee, Reiner called on the legislators to approve the independent audit. "As a result of First 5, hundreds of thousands of children across the state have received health care, preschool and other critical services to prepare them to succeed in school,'' he said in the letter. "I am confident that that any inquiry will serve to strengthen the mission of this important agency." The First 5 was created by 1998's Proposition 10, a Reiner-sponsored initiative that put a 50-cent per pack tax on cigarettes. He was appointed as the commission's first chairman in 1999 and stayed in the post until last month, when he took a leave from the unpaid job "to avoid any political distractions" while he ran the universal preschool campaign. That tobacco tax has generated more than $4 billion since 1999, with 80 percent going to county programs and 20 percent to First 5. In 2004-05, the state program's share of the money was $119 million. Backers of the audit have argued that it's hard to tell where the state commission's work ends and Reiner's political efforts begin. The groups that have done political advertising and public relations work for the state commission have also worked on Reiner's political campaigns, for example. Ben Austin, a close aide to Reiner, received more than $100,000 for consulting work he did for the commission. Austin was replaced as the Prop. 82 campaign manager this week. The campaign declined to say whether the controversy over the government payments played a part in the decision. Although Kris Perry, executive director of First 5, declined to answer questions at Wednesday's hearing, she had said earlier that Reiner had nothing to do with the decisions on what ads to run and when to run them, recusing himself from those discussions after he put together plans for his new initiative. The decision to run the ads at the same time as Reiner's initiative drive was the unexpected result of last November's special election, said Ray Behr, a former partner at the Santa Monica firm of GMMB, which put together the ad campaign. "The initial plan was to start the campaign in the fall, looking at sometime from July to September,'' said Behr, who opened his own consulting firm last week. "But when the special election was put on the ballot, GMMB recommended it start after the election, since no nonprofit wants to start its ads during the middle of a $200 million political campaign.'' GMMB also is a likely focus of the state audit, since the company worked with Reiner both on the Prop. 10 campaign in 1998 and in the effort to defeat Proposition 28 in 2000, which would have repealed Prop. 10. Since then, it has received about $170 million in contracts from First 5. "Everyone was always very conscious about maintaining separation between the state commission and the political effort,'' Behr said. "GMMB is not involved in the Prop. 82 campaign.'' State Auditor Elaine Howle said the audit, which was approved by the legislative committee 11-0, would take four to five months to complete and would delve into, among other things, the commission's advertising spending, contracting and whether there was coordination between the commission's media campaign and the Prop. 82 political campaign. E-mail John Wildermuth at jwildermuth@sfchronicle.com.
Dear Friends: I am looking for input on what I think is a very important issue - the proposed language to be used on the ballot and in the pre-election Voter Information Guide for November 7. This information was released last week and is available for review at the Secretary of State Website for California. My concerns: (1) the title states simply “Tax on Cigarettes.” It contains no mention of the impending tax on cigars, pipe tobacco, or any OTP products in the title; (2) it also fails to include the tax rate (135% or higher should Prop 99 kick in). For purposes here, I would like to concentrate on item #1. Election Code 9092 prohibits “false, misleading, or inconsistent” information in the Ballot Summary or the Voter Information Guide. Is a proposition title that states cigarettes only as a taxation source without mention of cigars, pipe tobacco or OTP “false, misleading, or inconsistent?” I think so. I’m of the feeling that somewhere in the middle of California’s voting electorate is a segment of voters that understands that cigarettes and cigars/pipes are two different worlds. These voters are knowledgeable people but certainly not schooled in all the issues, including ours. They may not be overly concerned about any of the propositions, including ours. If they’re cigar smokers, they’re probably occasional smokers. Or again, they may not be smokers at all. They may even lean toward placing another tax on cigarettes. However, they are unwilling to punish cigar and pipe smokers with further taxation. Maybe the new boyfriend smokes cigars, or perhaps good old Uncle Harry always had a stogie lit, or the aroma of pipe tobacco brings back memories of grandpa, or they rather see a traditional pipe smoking Santa Clause rather than today’s political correct version, or they have strong feelings about fair and unfair taxation. Whatever. They are not willing to vote for a tax on cigar and pipe smokers and they will vote against 86 if they realize that it is a tax on cigars and pipe tobacco in addition to being a tax on cigarettes. . But first they must be made aware of this fact. Question. How will this group of voters become aware that Prop 86 is a tax on cigarettes and cigars and pipe tobacco? How do we get this very basic information into their hands? As things stand now, they will most likely go the entire election campaign and Election Day without becoming aware that 86 is a tax on more people than just cigarette smokers. Why? Because at this point there is no means to make them aware of this very basic information about Prop 86. How are they going to become aware? Not through either of the two No on Prop 86 campaigns. The cigarette industry is not going to mention tobacco in any form. Its message is government waste, unaccountability, money grab by the hospitals, special interests, etc. Not through the Yes on Prop 86 campaign. Their spotlight is solely on cigarettes. They have no intention whatsoever of going near cigars and pipes or OTP. Have you read their news releases? Not a single mention of cigar and pipe taxation. Cigarette only. Not through the mainstream media. They have shown no willingness to cover the OTP tax or the plight of cigar and pipe smokers. Almost all coverage I’ve seen to date mentions cigarettes only as the taxation source. Not through the CAA. Its resources are with the No on 86 campaigns and its message is their message. There will be no “cigar” message by the CAA in this election. Will these voters become aware through the publicity and media efforts that we will put forth in our stores and our communities? Maybe. Maybe not. . What is left? Believe it or not we may have one chance and one chance only to make them – and all voters - aware of the complete tax implications of 86 and that will come at the finish line On November 7^th when they stare at their ballots in the voting booths. I would like that that ballot to say “Tax on Cigarettes and Cigars” (or some version of this that includes OTP). I have talked with both No on 86 Committees about this. No response back yet but I am not expecting them to seek any change. I will add that they have admitted that their focus groups and research have not addressed this matter. Was your experience like mine in the wake of Prop 10 when I heard the same refrain over and over again from customers, friends, and acquaintances: “Gees’, I didn’t know Prop 10 was a tax on cigars!” A ballot on November 7 with a title that says “Tax on Cigarettes and Cigars” will go along way toward preventing that from happening this time around. My biased feelings aside, how can the state of California expect the electorate to cast an informed vote with a ballot that will only read “Tax On Cigarettes?” We are at a crossroads on this issue. The next stop is Sacramento Superior Court. An August 14 deadline exists to challenge language on the ballot and in the Voter Information Guide, which is the pamphlet delivered to all households during the two weeks prior to the election. I am looking for feedback before proceeding since picking our battles is important at this point. You are retailers or friends of retailers who know the issue at hand and have gone through this before. Your opinion is valued. If you have a moment, please let me know how you feel on this topic. Is this issue extremely important, very important, just slightly important, or maybe unimportant and not a factor at all? Thank you for your time. Happy smoking, Charlie Hennegan Liberty Tobacco 1415 L Street, Suite 1250, Sacramento, CA 95814 \| ph 916.708.6811 \| www.noprop86.org No on Proposition 86, Californians Against Unaccountable Taxes, a coalition of taxpayers, businesses and law enforcement with major funding provided by R. J. Reynolds Tobacco Company , Inc. and the Cigar Association of America. Myths and Facts about Proposition 86 Myth: Prop. 86 will reduce the number of smokers in California. Fact: Prop. 86 will likely do more to reduce tobacco taxes collected than reduce actual smoking. People will still smoke; they will just look for ways to avoid paying the tax. The Legislative Analyst’s Office has stated that the high tobacco tax is likely to cause “an increase in out-of-state sales (as well as sales on tribal lands) and smuggled products for which taxes would not be collected.” This tax increase is so large ($2.60 per pack) that it could encourage smokers to purchase their cigarettes from alternative sources. This would cause the state of California to lose out on the tax revenue and hurt California’s small businesses that lose sales to other states and sources. Myth: Smokers are a burden on society, so it is fair to increase tobacco taxes to force them to pay 100 percent of the taxes going to things like obesity prevention and health insurance premiums, even though all residents benefit from these programs. Fact: Prop. 86 unfairly targets a small segment of society to fund programs that affect all Californians. This tax wrongly orders approximately 14 percent of California’s adult population to fund services such as payments to hospitals, insurance programs, nursing education and obesity programs that have nothing at all to do with smoking. If these services are as critical as the proponents claim, then shouldn’t they be funded by everyone? If special interests can force such a small population of people to pay such a large tax, who will they target next – wine drinkers, chocolate lovers? Myth: Proposition 86 is a measure designed to reduce smoking and benefit smokers by funding cessation programs and tobacco prevention and education. Fact: Don’t be fooled. According to the initiative, less than 10 percent of the estimated $2 billion generated from the tax actually goes to tobacco prevention and education programs, while almost 40 percent of the money goes to hospital corporations, including for-profit hospital chains. If smokers and users of tobacco products are the ones paying the tax, shouldn’t they be the ones benefiting the most, and not huge hospital corporations? Under this initiative, 85 percent of the revenues go toward programs that have nothing to do with smoking. Myths and Facts – Page 2 Myth: The estimated $2 billion of new revenue that will be generated annually from the initiative will have strict oversight guaranteeing proper use of the funds. Fact: There is no real oversight provided in the initiative to ensure funds are allocated as intended. Proposition 86 leaves it to the Legislature and unelected bureaucrats with no real oversight or accountability to the public to oversee the spending of roughly $2 billion dollars! With no real supervision or real accountability, this money could be wasted, just as existing tobacco tax money has been wasted on things like no-bid contracts to favored public relations and advertising firms. Myth: The money hospitals will receive from Prop. 86 will go towards providing better services for all patients. Fact: Don’t be mistaken. Although the corporate hospital giants would receive hundreds of millions annually from the tobacco tax, this initiative does not require them to provide any more patient care than they already do. The money could go right to their bottom line! In fact, the big hospital corporations wrote Prop. 86 to exempt themselves from antitrust laws! This will allow hospitals to decide among themselves which services they will or will not provide and at what price. The initiative allows hospitals to fix prices and engage in other anti-competitive behavior. The bottom line is that patients might not benefit, but the hospital’s pocketbooks almost certainly will. Myth: Making a change to the Constitution is the best way to impose a tax on cigarettes. Fact: The Constitution should not be used by special interest groups to benefit themselves. These changes to the Constitution leave little opportunity to fix the inevitable problems that could develop. Amending the Constitution is the wrong tool to increase taxes on tobacco, especially when changes may be necessary in the future.