This June, Californians will be asked whether cigarette smokers should subsidize research to treat diseases related to smoking cigarettes.
California’s Proposition 29, if passed, would levy an additional tax of $1 on every pack of smokes sold in the state beginning in October 2012. The tax would generate an estimated $615 million in 2012/2013, and $735 million in 2013/2014. Funds would be expected to decrease annually, in relation to declining cigarette consumption, but would remain substantial. Is this a good idea?
How is the money spent?
Revenues would be deposited into the California Cancer Research Life Sciences Innovation Trust Fund, and dedicated to “the support of research on cancer and tobacco-related diseases,” according to California’s Legislative Analyst’s Office (LAO). Money would be further divvied as follows:
- 60% would be used for research grants and loans around prevention, diagnosis, treatment, and potential cures for cancer and other tobacco-related diseases.
- 15% would be used for grants and loans for equipment and facilities
- 20% would be used for tobacco prevention and cessation programs
- 3% would be given to state agencies for law enforcement efforts to reduce illegal tobacco sales, cigarette smuggling and tobacco tax evasion
- 2% would be used to administer the plan, most of which would go to the Board of Equalization for tax collection costs
The proposition would also create a nine-member governing board – the Cancer Research Citizen’s Oversight Committee – empowered to distribute the funds.
UPDATE 5/14/12: The Altria Group (Philip Morris, US Smokeless Tobacco, and John Middleton) has more than doubled its opposition funding since this article was first published in March, to nearly $27 million, according to MapLight.org. For its part, the Reynolds American Corp. (R.J. Reynolds Tobacco Company, American Snuff Company, Santa Fe Natural Tobacco Company) has upped its contribution to over $12 million in an effort to sway voters against the law. Proponents of Prop 29 have contributed roughly $5.5 million to date, of which the American Cancer Society and the Lance Armstrong Foundation together have contributed almost $4 million. With a total spend to date of $39.9 million, the opposition parties are outspending proponents of Prop 29 by nearly eight to one.
For and Against
It’s not a huge surprise that Big Tobacco is against this tax. As of February 29, the Altria Group (Philip Morris, US Smokeless Tobacco, and John Middleton) had contributed $10.8 million to oppose Proposition 29, and Reynolds American had added another $4 million. The California Taxpayers Assocation (CalTax) also opposes Proposition 29, arguing that additional cigarette taxes will cause an increase in tax evasion, an increase in “national security and public safety threats” related primarily to smuggling cigarettes. Cigarette smuggling is a key source of funding for active terrorist groups operating in the U.S., CalTax claims, citing the State Department. CalTax also argues that cigarettes disproportionately impact low-income families, who shouldn’t be made to shoulder an additional tax burden.
So far, the opposition is outspending proponents of the measure by roughly $10 million. Top proponents as of February 29, in terms of contributions, are the Lance Armstrong Foundation, at 1.5 million; The American Cancer Society, American Lung Association and the American Heart Association, at a combined $1.3 million, and the Voters Organized For Community Empowerment (VOICE), at $152,188.
Yesterday, Steven Burrill, CEO at Burrill & Company, and Duane Roth, CEO at Connect, sent a letter to colleagues asking for industry to support Proposition 29, which would make “all California-based research institutes as well as California-based companies eligible to apply for funding, which could provide much needed research funding as well as support for early product development.” With respect to intellectual property, Propostion 29 “follows the National Institute of Health process…there are no required direct paybacks to the state,” according to the letter. “We can think of no greater return on investment to California and our leading edge research institutes and industry than investing in winning this ballot initiative,” the letter says. Given the prevalence of life science companies in California, should industry trade associations pony up to equalize the campaign spending mismatch? As Burrill and Roth argue, a “one-time $10 million investment can return more than $500 million a year indefinitely to fund life saving research.”