Is this the most regressive tax in America?

My mother lives in a very nice retirement community.  Typically for an affluent suburb, the residents are rich and white, while the employees are low-income and represent a variety of races (white, Asian, black, and Hispanic).  They’re not downtrodden employees.  Many have been there for decades and have strong bonds with the elderly in their care.  But they’re definitely not middle or upper class.  Economically, they’re working or lower class.

Man smoking

Here’s another broad statement I can make about the community in which my mother lives:  Almost none of the affluent residents smoke cigarettes, while a high percentage of the poorer employees smoke.  I know that my statement about the employees is true because I’m there often and I always see a rotating crop of employees hunkered down in the garage or standing out on the streets smoking.

I have to admit here to hating cigarettes.  (And yes, I know that “hate” is a very strong word.)  I have an unusually sensitive sense of smell, and cigarettes are very high on my list of unpleasant odors.  Just to give you an idea how much I hate the smell, back in the early 1980s, when I’d return to my flat in England after a night of dancing (not drinking, just dancing), I was so repulsed by the cigarette smell that clung to me that I’d instantly take a shower.  This doesn’t sound like a big deal until you realize that I was doing this between November and March, when the flat had no hot water after 10 p.m., and the shower water was probably just above freezing.  I hate cold water, but I hate the smell of cigarettes even more.

My loathing for cigarettes means that I’ve always had two thoughts when I’ve seen the employees puffing away.  My first thought is, “God, I hate that smell.”  My second thought, always, is “They must be spending a huge percentage of their income to support that habit.”

Cigarette pack

Today, my thoughts went one step further.  Yes, they are spending a huge percent of their income, but they’re not actually spending it on the cigarette.  Instead, they’re spending it on the taxes for that cigarette.  Here in California, cigarettes are taxed at a very high rate:

Cigarettes are subject to both the cigarette tax and the cigarette and tobacco products surtax. The tax and surtax are paid by distributors through the use of tax stamps, which are purchased from the Board of Equalization (BOE) and affixed to each package of cigarettes before distribution. The cost of the stamp includes both the cigarette tax and the surtax. Currently, each stamp costs 87 cents per pack of 20 cigarettes, comprising 12 cents for the cigarette tax and 75 cents for the combined surtax.

Tobacco products, not including cigarettes, are subject only to the cigarette and tobacco products surtax. Tobacco products include all forms of cigars, smoking tobacco, chewing tobacco, and snuff, as well as other products containing at least 50 percent tobacco. Effective July 1, 2011, through June 30, 2012, the rate is 31.73 percent.

I don’t know whether the consumer has to pay the usual county sales tax on top of all those state taxes, but I assume he (or she) does.  If that assumption is correct, you can add on an additional 8% or so to every cigarette pack sold in California, depending on the sales tax rate.

Shake down for money

This is a staggeringly high tax rate.  Worse than that, it’s a hugely regressive tax rate, meaning that it falls most heavily on those who can least afford it.  The regression is hidden, because it looks as if everyone who purchases cigarettes, rich or poor, pays the same “sin” tax for the product.  In fact, though, rich people in California have mostly given up on smoking.  This particular sin tax is passing them right by.  Poor people, whether they smoke because of peer pressure to smoke, or because they’re immune to government pressure to quit smoking, or because it’s a real pleasure in a life too financially constrained to have many pleasures, end up paying that tax.  Worse, because the government relies on this sin tax to fund health programs and education, as people quit, they keep raising the tax to stabilize revenue.

I hate cigarettes.  What I hate even more, though, is a government that funds itself by using regressive taxes.  It’s a sleazy practice.  How much better, of course, if we would fall back on a non-religious version of tithing, as Dr. Carson so gracefully suggested in the speech he gave before a manifestly bored and uncomfortable President Obama.

This wasn’t what the social engineers had in mind

Sin taxes:  the unusually high taxes we impose against disfavored activities in the hope that, if the activity becomes way too expensive, people will think twice about engaging in that particular sin.  Cigarettes and alcohol are the two major targets of sin taxes.

In California, in 1998, California voters passed Prop. 10, a sin tax which imposed a $0.50 tax on each pack of cigarettes.  This tax was accompanied by the directive that the money raised would go to aid children.  If I remember correctly from my own sense at the time, and as UC Berkeley Professor Bruce Fuller argued, whatever the Prop’s actual language may have been, voters believed that the money raised would aid disadvantaged children:

“Rob Reiner sold this as a way to help kids from low-income (families) – zero to 5 – have better futures,” said Fuller.

What’s happened, unsurprisingly, is that smokers still smoke, only those with families have less money, I guess, for their own children.  What’s also happened is that the savvy people are getting the money and, especially in the Bay Area, savvy isn’t always the same as disadvantaged:

Scores of savvy San Francisco parents have tapped a pot of taxpayer dollars for everything from children’s ice skating lessons and Monterey Bay Aquarium field trips to supplies for Halloween parties and chartered buses to the Jelly Belly factory in Fairfield.

Whether rich or poor, applicants can get up to $11,000 over three years for all kinds of activities from First 5 San Francisco, a local agency charged with distributing Proposition 10 tobacco tax revenue to promote early childhood development.

Last year, about $564 million in Prop. 10 revenue was distributed by the state and its 58 county First 5 commissions, which have wide discretion over how the money is used. San Francisco’s commission receives about $9 million annually and uses $200,000 each year to fund its unique Parent Action Grants program, which began in 2001.

I can’t blame these parents at all.  I would do the same if I still lived in the City and knew about the program.  The way the program is set up, it’s supposed to aid parents in parenting.  And heck, I may be well-educated and (Thank God!) financially pretty secure, but that doesn’t mean that, as a parent, I can’t use all the help I can get.  The program’s distribution pattern practically invites people like me to use its resources:

A sampling of the grants:

– “Multi-Family First Time Camping Experience” included a camping lesson and overnight trip to Big Sur for six families.

– “Couples Travel and Learn Together” included an overnight stay at the Four Points Sheraton in Pleasanton, where couples from Chinatown took marriage workshops. It also included $250 in Target gift cards.

– “Families of La Piccola Scuola Italiana” included holiday party space rental and the purchase of a Babbo Natale (Italian version of Santa Claus) costume.

“We really want to engage parents and involve parents in raising their children from birth to age 5 and help them build leadership and hope that transfers to being involved in the PTA and getting involved in the community,” said Laurel Kloomok, executive director of First 5 San Francisco.

The article goes on in the same vein, but the underlying point is clear:  once again, the market was perverted in the cause of good health and social justice, without any significant benefits actually flowing in that direction.  It makes me very, very glad that voters recently turned down another Rob Reiner social engineering attempt, which was to have government take over all pre-schools in California — something that would have entirely destroyed such wonderful pre-K programs as Montessori and Waldorf.