A petition filed with the California Office of the Attorney General to raise the cigarette tax by $2 per pack could mean a substantial increase to the cigar and other tobacco products (OTP) tax should it reach and pass the November ballot. Because California bases its OTP tax on the ratio of the total cigarette tax to the weighted average wholesale cost of one cigarette, raising the tax would significantly increase that ratio. Currently, California’s OTP tax sits at 28.13 percent of the wholesale cost, a number arrived at by dividing the total taxes on a single cigarette—6.85 cents—by the weighted average wholesale cost of one cigarette—24.35 cents. Adding that extra dime to the cigarette tax would result in a new ratio of 69.2 percent, meaning that a cigar with an MSRP of $9.50 would go from costing an estimated $12.17 before state and local sales taxes to $16.07, again before sales taxes. The petition is backed by noted political contributor and billionaire Tom Steyer, a former hedge-fund manager and environmental activist who is also considered a possible candidate for governor in 2018. He has personally contributed $1 million to the signature gathering effort and has already garnered the support of ...
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