California currently taxes cigarettes at 87 cents per pack, which places the state tax at 22nd-highest among the states. The money from the tax currently goes to (1) the general fund, (2) to obligations incurred by Proposition 99 (the Tobacco Tax and Health Promotion Act of 1988), (3) to childhood development programs authorized by Proposition 10 (the California Children and Families First Initiative of 1998), and (4) to a breast cancer research fund established by the Legislature in 1994. The state raises approximately $1.094 billion in revenue from the tobacco tax each year, according to the California Budget Project.

Proposition 86, if it passed, would make California the state with the highest tobacco tax in the nation, at $3.47 per pack. A recent Orange County Register article points out that smokers could drive to Arizona or Nevada to buy cigarettes (where cigarette taxes are $1.18 and 98 cents per pack respectively) if Proposition 86 becomes law. They could also turn to the black market, as happened in New York when the state raised its cigarette tax to $3 per pack.

The California Budget Project confirms that the tax envisioned by Proposition 86 could be regressive, in that it would have the most significant impact on low-income consumers. Low-income consumers would spend 0.9% of their income on the tax if it passed. Taxpayers in the top 1% would spend 0.01% of their income on the tax.

Proponents counter that low-income consumers would benefit from the health programs that the tax would help fund, and they also contend that low-income consumers would be more likely to stop smoking as a result of the higher cost of buying cigarettes.

The California Budget Project has issued a comprehensive report on the potential economic and other impacts of the ballot measure.

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