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Post Prop 56 tax revenue plummets

11 Jul 2017. California state tobacco tax revenue fell 64 per cent in May, much more than expected, after the steep tax increase approved by state voters under Proposition 56 took effect, the Sacramento Bee said.

A report by the nonpartisan Legislative Analystís Office also showed increased tobacco tax revenue of 24 and 37 per cent in the two months before the USD 2 (EUR 1.75) per-pack tax increase took effect on 1 April, according to the Bee. The 64 per cent increase was recorded in May. A projection published by the same office before voters approved Prop 56 in November estimated cigarette purchases would fall 20 to 30 per cent, the newspaper said.

Stockpiling ahead of the tax hike may account for the revenue increases prior to 1 April, a report author told the Bee. California smokers may be purchasing cheaper out-of-state cigarettes or purchasing through the internet, the expert reportedly said. California expects Proposition 56 will more than double tobacco tax revenue to USD 1.4 billion through June 2018, the newspaper said.