Increasing cost is most effective deterrent to smoking.

WHEN it comes to improving productivity and performance, taxing cigarettes is a smart business decision. It's not a stretch of the imagination to say smoking burdens our already overtaxed health care system--whose costs are rising faster than the price of a gallon of gasoline,

Tobacco use hurts California's economy, the health care system and individual taxpayers. California businesses understand they have a vested interest in the well-being of California's health care system. In fact, according to a recent statewide survey conducted by Small Business California, a non-partisan statewide advocacy group, about 91 percent of the 500 small business owners surveyed said rising health care costs were a "top" or "high" priority.

Company owners, executives and managers may be surprised to learn just how much they are currently paying for the price of smoking.

According to the California Department of Health Services, California is losing at least $1.5 billion each year in productivity due to smoking-related illnesses. California taxpayers are paying about $8.6 billion annually in health care related to smoking. Whether you smoke or not, that's more than $860 a year for every family in the state.

The U.S. Centers for Disease Control and Prevention estimates that the economic cost of smoking includes more than $75 billion a year in direct health care expenses and that health care will account for 1 in 5 dollars spent in the United States by 2015.

What's most disturbing in this equation is the fact that 42,000 Californians annually die of smoking-related diseases and that smoking remains the number one cause of preventable death and disease.

For the lax

That's why California health care advocates and the business community are coming together to support the Tobacco Tax Act of 2006. If passed, this initiative will reduce smoking, especially among kids, and fund critical health care priorities such as disease prevention, medical research, children's health insurance and emergency room care--all factors that affect the bottom line of every business.

To date, our coalition includes the Los Angeles Chamber of Commerce, the American Cancer Society, American Lung Association, American Heart Association, the Children's Partnership, the California Hospital Association, emergency doctors and nurses, among many others.

Increasing the price of cigarettes is the most effective deterrent to smoking. That's why some might ask whether it's inconsistent to advocate for a tax that we hope will ultimately be nonexistent. The answer is "absolutely not". Here's why:

* First, an important goal of the initiative is to encourage people to quit smoking and prevent others from starting. The fewer smokers we have in California, the fewer people will need treatment for smoking-related illnesses.

* Second, the expenditures within this initiative take into account the expected decline in consumption and revenue. It's been proven throughout the country that increased new revenue received on each pack of cigarettes outweighs the revenue losses from fewer packs being sold.

* Finally, the initiative includes safeguards to ensure that all funds are used to achieve the above goals: no new bureaucracies or entitlements are created, no other taxes will be created or used to offset the funding losses expected by lower cigarette sales and strict safeguards and audits are included to make sure that funds go exactly where voters intend. Importantly, legislators will not be able to raid the trust funds.

And note, every dollar invested in tobacco education and prevention saves three dollars in the long run.

Critics of taxes use scare tactics and buzz words about black markets and terrorism. Don't be fooled. Research and purchase patterns prove that cigarette smuggling among individuals is a relatively small problem and not exacerbated by price increases. Smokers are more interested in convenience than crossing state borders or seeking out illegal black market vendors to buy their cigarettes. About two-thirds of all cigarettes sold in the U.S. are sold by the single pack.

Further, California has one of the strongest enforcement records in the country. This initiative provides more than $18 million to improve the state's effective law enforcement programs against smuggling and counterfeit activity, including support for the Board of Equalization's Cigarette and Tobacco Products Licensing Act, which recovered $125 million last year.

The bottom line for business: The Tobacco Tax Act of 2006 is a sound, responsible and effective way to prevent and reduce smoking and the associated health care costs that are crippling our economy.

Charlie Smith is chairman of the Coalition for a Healthy California and chairman of the American Cancer Society, Los Angeles Region.