State's Tobacco Tax Revenue Drops as Cigarette Sales Fall

Last year, cigarette sales in California dropped by 8.1%, the largest one-year decline in the past 10 years, according to the state Board of Equalization, the Sacramento Bee reports.

The board estimated that 972 million packs of cigarettes were sold in California last year, down from 2.8 billion packs sold in 1980 (Calvan, Sacramento Bee, 7/28).

According to the California Department of Public Health, the percentage of smokers in California also has declined by nearly 50% since 1985 (Hsu, Los Angeles Times, 7/27).

Higher Prices Per Pack

The federal per-pack tax on cigarettes increased by 62 cents last year, bringing the total tax to $1.01 per pack. In California, a package of cigarettes now costs an average of $5.09 (Sacramento Bee, 7/28).

In addition to a higher sales tax, cigarette manufacturers also raised their product prices by an average of 4.2% between fiscal year 2008 and FY 2009 to compensate for a drop in demand (Los Angeles Times, 7/27).

Good News for Public Health, Bad News for Health Programs

California's decline in cigarette sales could have a positive effect on public health because smoking has been linked to cancer, emphysema, heart disease and other medical conditions.

However, the drop in sales also means that the state is collecting less in tobacco tax revenue. During the most recent fiscal year, the state received $839 million in cigarette tax revenue, down from the $913 million it collected in the previous fiscal year (Sacramento Bee, 7/28).

California's tobacco tax revenue helps finance health education programs, early childhood development, breast cancer research and other state programs (Hall, Orange County Register, 7/27).

Diane Levin -- chief deputy director of First 5 California, which uses tobacco tax revenue to fund early childhood health and education programs -- said she expected the decrease in cigarette sales and tax revenue. Levin added that her organization is developing strategies to do more with less funds (Sacramento Bee, 7/28).

Sue Horowitz
One of the primary goals of the increased tobacco tax was to deter smokers/smoking. A by-product and secondary benefit has been funding assistance for critical public programs such as early childhood education, public health programs and health care research. It is important that the recipients of this tax money not become complacent but continue to strengthen their core programs, broaden potential funding sources, budget conservatively and carefully in recognition of the transitory and fluctuating nature of special tax funding.

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