Views From The Prop 29 Frontline

Published in CSP Daily News

CIOMA's VP discusses what tax increase could mean for retailers … and better ways to support cancer research

By  Melissa Vonder Haar, Tobacco Editor

[UPDATE: Proposition 29, California's referendum to raise the tax on cigarettes by five cents per cigarette ($1 per by pack) and an equivalent tax increase on other tobacco products to fund cancer research, has been defeated. According to Secretary of State Debra Bowen's California Presidential Primary Election website, with 100% of precincts reporting, 50.8% of voters voted against the ballot measure, while 49.2%t voted in favor of the ballot measure.]

SACRAMENTO, Calif. -- Today, California voters will determine the fate of controversial tobacco tax measure, Proposition 29. At first, a victory seems all but certain: two months ago, 67% of likely California voters supported the tax increase; however, current polls have that number down to just 50%, making it too close to call.

And it's not just California retailers who have fought to educate voters about Prop 29's downsides--The Los Angeles Times published a scathing editorial on May 27, criticizing how easily funds could be allocated to out-of-state research.

"When you have the LA Times coming out with an editorial against this, that's significant," said California Independent Oil Marketers Association (CIOMA) vice president of government relations and communications, Jay McKeeman. "It's so frustrating to see these very narrow special interests create their own specific solution that doesn't address the broad needs of the state."

It certainly doesn't address the needs of the more than 36,000 tobacco retailers in California who rely on high-margin tobacco sales to survive trying economic times.

"Every time you take away a product with a good margin on it, it makes it more and more difficult for retailers," said McKeeman. "Especially in a state like California with high tax rates and a lot of very expensive environmental mandates to meet."

The proposition also doesn't address California's need to lower its unemployment rate. The National Association of Convenience Stores (NACS) estimates tobacco sales account for 36.6% of c-store sales--Prop 29's increase of $1 per pack would almost certainly impact an operator's ability to create new jobs.

"C-stores are one of the most important entry-job generators in the state," said McKeeman. "With the state unemployment hanging at 11% to 12%, it just creates another problem for creating new jobs."

Overall, McKeeman believes Prop 29 would limit the ability of small business operators to remain profitable. "Less margin, less profit, less ability to grow your business," he said. "It all adds up."

That's not to say McKeeman is against the cancer research Proposition 29 aims to fund; however, he believes such issues should be handled in the state legislature--and would welcome the opportunity to sit down with Prop 29 advocates in such an arena.

"We deal every day in the legislative process and frankly, our reputation is that of a problem-solver," McKeeman said. "What we find out in the legislative process is if you have a problem, you get the stakeholders involved, sit down and find out where there's consensus on things and build from there. Many minds are better than a few minds."

The voters of California will be the ones to decide if McKeeman and other tobacco retailers will have the opportunity to talk through the issues--or merely suffer the consequences of another massive tax increase.