California cigarette tax hike slashes sales

Last fall, California voters approved the biggest increase in cigarette taxes since the state first began levying tobacco in the 1950s. Advocates for Proposition 56, which passed with a fairly overwhelming 64 percent of the vote, argued that a $2 per-pack tax hike would hurt pocketbooks enough to nudge millions of California smokers to quit, or at least to light up less frequently.

When the tax went into effect in April, smokers saw the average cost of a pack of cigarettes soar from under $6 to up to $9, making California one of the most expensive states in which to buy cigarettes. The early data suggests that yes, California cigarette sales have declined significantly since prices went up. In fact, the drop is even sharper than the state anticipated—which could spell trouble for state coffers.

Cigarette pack “distributions”—tax lingo for a pack of cigarettes typically sold from a distributor to a retailer, and a good proxy for consumption—dropped 56 percent year-over-year in the two months following the tax increase, according to data obtained from the California Department of Tax and Fee Administration and analyzed by CALmatters. That’s a decline of nearly 82 million packs.

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