California Taxpayers Have Major Questions to Answer This Fall

Each year National Taxpayers Union (NTU) surveys the statewide ballot initiatives, referenda, and constitutional amendments facing voters across the country and how these measures would impact taxpayers. Though California is not a swing state in the presidential campaign, it is the epicenter of significant statewide questions. These questions may not generate the same number of headlines as Donald Trump or Hillary Clinton, but they could have a profound impact on the lives and pocketbooks of residents of the Golden State. California taxpayers should be wary of three propositions in particular. 

In 2012, voters in California supported Proposition 30, a supposedly “temporary” tax hike on upper income individuals in order to stabilize the state’s budgetary mess. Specifically, Proposition 30 created three new income tax brackets for upper income individuals – meaning California has the highest top marginal income tax rate in the country. These temporary tax hikes are set to expire in 2018. On the ballot this fall is Proposition 55, which will ask voters whether to extend the “temporary” personal income tax rates for another 12 years. The budget situation in California has markedly improved since the passage of Proposition 30. Passage of Proposition 55 – extending the tax hikes another 12 years – is unnecessary and will lead to larger, more expensive government for California taxpayers. 

Proposition 56 is another ill-conceived question on the California ballot this fall. If enacted, it would raise cigarette taxes by $2.00 per pack. Even worse, it would also expand the definition of “other tobacco products” to include vapor and electronic cigarettes, which would subject these products to this tax increase and previously approved tobacco tax hikes. Setting aside the fact that these taxes are highly regressive and will lead to an increase in cross-border and black market purchases, applying new taxes to vapor products and electronic cigarettes will pose serious public health problems for Californians.

Smokers are increasingly turning to these new technologies, which contain nicotine but not the harmful chemicals found in combustible cigarettes, to help kick their habit. Electronic cigarettes are 95 percent less harmful than traditional cigarettes, according to a 2015 independent study done by Britain’s top public health agency, Public Health England.  In 2016, the same agency approved an electronic cigarette as a recognized method to help people quit smoking, which will allow doctors in the U.K. to prescribe and dispense electronic cigarettes. Making these products – vital for people trying to quit smoking – more expensive is particularly unwise.

Another ballot measure affecting a public health issue is Proposition 61, which would prohibit California agencies from purchasing prescription drugs unless the cost is less than the price paid by the United States Department of Veterans Affairs. Though ostensibly written to curb state expenditures on prescription drugs, Proposition 61 would likely lead to increased health care spending by eliminating rebates offered by pharmaceutical companies to the state.  Likewise, passage of the Proposition could incentivize pharmaceutical companies to begin charging the VA higher prices – a bad deal for all American taxpayers, not just Golden Staters. 

There is no question that people are living longer, healthier lives due in large part to the wonders of modern medicine. Regrettably these modern medicines are costly to bring to market, but the solution to the problem is to tear down regulatory barriers, not impose ill-conceived price controls that will cook the proverbial goose that lays the golden egg. Should California and other states adopt price control measures, pharmaceutical companies are likely to curtail cutting edge research and development because they will be unable to recoup their initial investments. In short, Proposition 61 is a prescription for a poorer, less healthy California.

With the likely onslaught of higher taxes and more regulation coming from Washington next year, taxpayers in California would be wise to do what they can to push back against more intrusive and expensive state government. 

About the Author
Clark Packard is Counsel and Government Affairs Manager of the National Taxpayers Union, a large grassroots taxpayer advocacy group dedicated to fighting for limited government at the federal, state, and local levels.