California Proposition 99, Tobacco Tax Increase (1988)
Proposition 99 imposed an additional excise tax on cigarettes amounting to 25 cents for each pack of 20 cigarettes. Proposition 99 also imposed additional taxes on cigars, chewing tobacco, pipe tobacco, and snuff. Funds raised through this tax are to be spent on health education, hospital services, physician services, research and public resources.
Proposition 99 was the target of extensive litigation. One important case, Kennedy Wholesale v. State Board of Equalization, was about whether Article XIII of the California Constitution, which requires a two-thirds vote to raise taxes, applies to taxes raised by initiative. The courts found that if a tax increase is proposed by initiative, as in Proposition 99, it only requires a simple majority to pass.
The official ballot summary said, "Imposes additional tax upon cigarette distributors of one and one-fourth cents (1 1/4 cents) for each cigarette distributed. Imposes tax upon distributors of other tobacco products which is equivalent to combined rate of tax imposed on cigarettes. Directs State Board of Equalization to determine this tax annually. Places moneys raised in special account which can only be used for: treatment; research of tobacco-related diseases; school and community health education programs about tobacco; fire prevention; and environmental conservation and damage restoration programs. Declares revenues not subject to appropriations limit. Summary of Legislative Analyst's estimate of net state and local government fiscal impact: Will raise additional state revenues of approximately $300 million in 1988-89 (part year) and $600 million in 1989-90 (first full year). These revenue increases would decline gradually in subsequent years. Annual administrative costs are estimated at $500,000 in 1988-89 and $300,000 in subsequent years. There would be no substantial net effect on sales and excise tax revenues to the state, cities, and counties."
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- County of San Diego v. State. 15 Cal. 4th 68, 931 P.2d 312, 61 Cal. Rptr. 2d 134 (1997).
- Rossi v. Brown. 9 Cal. 4th 688, 889 P.2d 557, 38 Cal. Rptr. 2d 363 (1995).
- Kennedy Wholesale, Inc. v. State Bd. of Equalization. 53 Cal. 3d 245, 806 P.2d 1360, 279 Cal. Rptr. 325 (1991).
- Americans v. State. 51 Cal. App. 4th 743, 59 Cal. Rptr. 2d 416 (1997).
- American Lung Ass'n v. Wilson. 51 Cal. App. 4th 743, 59 Cal. Rptr. 2d 428 (1996).
- Tailfeather v. Board of Supervisors of Los Angeles County. 48 Cal. App. 4th 1223, 56 Cal. Rptr. 2d 255 (1996).
- State Compensation Ins. Fund v. State Bd. of Equalization. 14 Cal. App. 4th 1295, 18 Cal. Rptr. 2d 526 (1993).
- League of Women Voters v. Eu. 7 Cal. App. 4th 649, 9 Cal. Rptr. 2d 416 (1992).
- Kennedy Wholesale, Inc. v. Board of Equalization. 227 Cal. App. 3d 228, 265 Cal. Rptr. 195 (1990).
The fiscal estimate provided by the California Legislative Analyst's Office said:
- This measure would raise additional state revenues of approximately $300 million in 1988-89 (part year) and $600 million in 1989-90 (first full year). These revenue increases would decline gradually in subsequent years.
- In addition, this measure would have two offsetting effects on State General Fund and local revenues. First, the measure would increase sales tax revenues. This is because the sales tax is imposed on the total price of tobacco products, including the increased excise tax. Second, the measure would reduce revenues from the existing 10-cents-per-pack cigarette excise tax, because some consumers would reduce their purchases of tobacco products in response to the higher taxes. These revenue effects would offset each other, and there would be little or no net effect on the State General Fund or on local revenues.
- Administration of the surtax on cigarettes and tobacco products would increase annual costs to the State Board of Equalization by approximately $500,000 in 1988-89 and $300,000 in subsequent years. These costs would be reimbursed out of the proceeds of the additional taxes.
- PDF of the November 8, 1988 ballot proposition voter guide
- California Law Library, November 8, 1988 ballot propositions
- Hastings California I&R database