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Taxing the system

November 30, 2005

A SIN TAX POSES A DILEMMA for its supporters: They are never sure whether to hope the tax works (which means the sin is on the decline) or hope it doesn't (which means the revenue is on the rise). And sin taxes used to pay for ballot propositions are even more risky: If they don't work, the pet cause they finance fails. And if they do, they only become more attractive as a way to finance someone else's pet cause.

All this is by now familiar to Rob Reiner, who recently warned the California Hospital Assn. that he plans to "vigorously oppose" its ballot proposal to raise cigarette taxes to fund emergency rooms. This from the actor, director and activist who pushed Proposition 10 in 1998, slapping a 50-cent tax on a pack of cigarettes to pay for his own pet project, health and education programs for preschoolers.

Back then, Reiner said he'd be delighted to see cigarette sales drop, even if it dried up funding for his initiative, because it would mean people were quitting smoking. Now he objects to the additional tax because it would make cigarette sales drop, drying up funding for his initiative.

Reiner is undoubtedly sincere in wanting to see less smoking and more healthcare funding. He is simply trapped in the upside-down universe of what might be called Proposition World, a place where every cause is more important than the last, and they all come with their very own tax increase. It's a world that gets more crowded every year, and voters can expect to see several such initiatives in 2006 -- including another from Reiner, plus an additional cigarette tax for cancer research and children's healthcare.

It is true that the hospital group's ballot proposal is all but certain to cause a steep dip in cigarette sales. The initiative would compensate the Proposition 10 till with $70 million a year, but that wouldn't cover all its losses. That's been covered in the past by a sort of gentlemen's agreement that gives first dibs to the tax that got there first. Reiner honored that concept with his own tobacco tax, which came a decade after Proposition 99 raised cigarette taxes to fund health programs. But Reiner's proposition generously directed the state to give the first cut of funds toward Proposition 99 before funding preschool programs.

The rules of the game can change, however -- in part because there are fewer gentlemen when it comes to ballot initiatives.

As it happens, Reiner now seeks to fund universal preschool with an additional income tax on wealthy people, less than two years after voters approved another income tax on the wealthy to raise money for the mentally ill. Does this mean the mental-health activists will oppose his initiative? The Legislature too has been eyeing the top 1% of income earners, the same group Reiner targets, as a potential source of stable revenue for a range of worthy programs, including public schools.

But the Legislature is famously slow and fractious at making key decisions, and activists are notoriously agile. In fact, that's why many groups turn to the initiative process. They're tired of waiting for the Legislature to do a better job of funding their priorities.

No matter what makes sense, many of the coming initiatives will pass because Californians are fond of approving a new tax for a good cause -- as long as it's on someone else.

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