SAN FRANCISCO - California officials may have dramatically overestimated how much revenue the state will get from a new law requiring special licenses to sell tobacco products, casting doubt on the revenue numbers Gov. Arnold Schwarzenegger is counting on to balance his $99.1 billion 2004-2005 budget.

Enforcing the new law also won't be cheap, which is why the state imposed new licensing fees and a one-time, penny-a-pack tax on cigarettes to cover the cost of collecting the revenue. A 2003 BOE staff analysis projected these would bring in $38.3 million over the seven-year life of the law - and yet, that same analysis also estimated the cost of enforcement at more than $49.8 million.

The Cigarette & Tobacco Products Tax Act, passed by the legislature last year and effective July 1, was designed to curtail tobacco tax evasion and produce additional millions for the state's dwindling treasury through a stringent system of monitoring tobacco sales and improving tax collections. The law is designed to attack what state tax collectors view as a growing epidemic of tobacco tax evasion estimated at $300 million annually on cigarettes alone.

Tobacco taxes have declined in recent years from $1.8 billion in the fiscal year 1999-2000 to about $1.03 billion in the fiscal year that ended June 30, 2003.

But it's impossible to tell whether the decrease in revenues is due to the state's aggressive anti-smoking campaigns or to an increase in tax evasion - which includes smuggling of untaxed tobacco and the open sale of cigarettes bearing counterfeit tax stamps.
At the same time, however, another study was conducted by the University of California San Francisco's Center for Tobacco Control, Research and Education that estimated a much lower volume of tax evasion - between 1 percent and 4.2 percent.

Ever since, both sides have been at statistical loggerheads.

"I read the UCSF study and found its methodology pretty suspect," said Fitz, who stands by his estimates that tax evasion is about 25 percent. "It runs counter to (results from) other states and I don't put much credence in their study."

"We think the stuff BOE did is just complete trash," counters Dr. Stanton A. Glantz, who co-authored the UCSF study. "It's politically motivated."

Glantz's report criticized the "unscientific manner" in which the BOE study was conducted...

"They certainly don't need any more laws dealing with tobacco," says John Roscoe, founder and vice president of Benicia-based Cigarettes Cheaper, which operates a chain of discount retail stores. "It's part of a continuing trend where you make everything a crime. Maybe they should prescribe what you CAN do - that list is getting smaller."

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"We think the stuff BOE did is just complete trash," counters Dr. Stanton A. Glantz, who co-authored the UCSF study. "It's politically motivated."

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Of course Glantz should know all about coming up with numbers that are complete trash and politically motivated.

Glantz's name on any "study" means the thing is garbage. His anti-tobacco agenda comes above all honesty and science for him. He's simply a propagandist.

Quite a few years ago NY did the same thing of making us all pay $300 a year for the privilege to sell cigarettes, we we're paying $25.00.

That's a lot of cigarettes to sell to cover $300. We sold them mainly for the convenience of the customer, same with a few of the gas stations around and clubs. I was the first to just give up selling them. Then when they raised the price it was just about impossible to keep enough change on hand plus they made it a law to have the machines in the presence of the bartender. Soon everyone realized it wasn't worth $300.00 so within one year all 11 of the area clubs, gas stations and bars quit providing them. Now customers just make sure to stop at the convenience store and they've adjusted. So now, instead of the $275 they were making, counting on $3,300, they make nothing. In fact, I see very few places bothering to sell them anymore unless it's the chain convenience stores.

I see the Sennaca Indian Tribe has began manufacturing cigarettes.. at $1.05 per pack and NO money for the MSA cozy agreement. Its $10.50 per carton. At least you New Yorkers go after your political criminals..I am sure the indicted (or soon to be indicted) voted for the smoking ban statewide..

They have some even less than that. Quite a selection and most are below $10.00 a carton. You can get their one brand for $8.95 a carton. Quite a savings when it's $5.75 for one pack of Marlboro at the convenience store.
Most name brands, Marlboro, Winston, Salem, Camels run around $25.00 to $28.00 a carton.

Thanks Lizzie,
I am a regular supporter. This time I added a carton of the new cigarettes. If they are good I will save a bundle and no money will go to the MSA states. Anyone heard from Jane Reise since she had her operation??

As they say about divorce..there are 3 sides to the story: his, hers, and the truth.

I see the same with the reasons for declining cigarette tax revenue.

Glantz is going with the lowball on tax evasion to bolster his claim that less people are smoking. The BOE is going with the high end to justify more money for enforcement and control.

The basic reason is somewhere in the middle - but there is no doubt the number is probably cloer to the BOE than to Glantz. We;re Americans - we are not stupid and we seek the lowest price possible on the items we desire.

When I am not making my own, I buy a brand from a small Virginia manufacturer that is not part of the MSA. They are $8.99 a carton.

This is one of the companies the big boys are going after state by state to get legislation passed to force them to pay into the MSA. PM lost that battle in Virginia when the owner of the little company said - force me and we are gone and we will not only close the plant and lay off all 500 workers, we will stop selling in Virginia.

As far as I'm concerned, anyone that stands up to PM is A-OK in my book.