California weighs doubling its cigarette tax

at 11:04 AM ET, 06/05/2012

California voters head to the polls today to vote on a $1 tax hike on cigarettes. The referendum has sparked a huge battle between the tobacco industry and public health advocates, with $47 million poured into advertising on the issue, and polls suggests voters are evenly split.

California already has the country’s second-lowest smoking rate, with 14 percent of adults who report being cigarette smokers (nationally, that number sits at 18 percent.) That likely has to do with California consistently being the biggest spender on tobacco cessation activities. The one area where falls behind other states, however, is cigarette taxes. It currently taxes cigarettes at 87 cents per pack; nationally, the average is $1.46.

If California approves a new cigarette tax, history indicates it would almost certainly drive down the the state’s smoking rate. Numerous studies have shown that cigarettes have a high level of price elasticity, meaning that price can significantly influence demand. Most studies estimate that a 10 percent increase in price of cigarettes will lead to a 3 to 5 percent reduction in consumption. As the price of cigarettes has steadily grown over four decades, consumption has steadily dropped:

Cigarette taxes didn’t happen in a vacuum; the past few decades have also seen the advent of numerous other policies meant to curb tobacco consumption, such as bans on smoking in public places and restrictions on cigarette advertising. Still, when it comes to driving down smoking rates, research suggests that raising prices is a pretty surefire way to do so.

Read what others are saying

    Most Read: Business

     Last Update: : AM 01/27/2015(NASDAQ&DJIA) |

    World Markets from      


    Other Market Data from      


    Key Rates from