Since 1998, tax hikes have boosted the price of cigarettes in California to approximately $4.00 per pack, higher than in many other states and nations. Two tax hikes occurred in November 1998: Voters narrowly approved Proposition 10, and at the same time California joined 45 other states in the Master Settlement Agreement with the four largest tobacco manufacturers.
Graphic 22: California Cigarette Excise Tax Rates Since 1959
Source: Orzechowski & Walker.
Proposition 10 raised the tax rate from 37 cents to 87 cents per pack, and the MSA raised nationwide cigarette prices by nearly $250 billion over the next 25 years, or approximately 45 cents per pack. The federal government then raised its rate 15 cents, first by a dime in January 2000 and then by a nickel in 2003, bringing the federal tax to 39 cents. In 2006, California voters defeated Proposition 86, which would have increased the tax per pack from 87 cents to $3.47, the highest tax in the nation.
The combined effects of state and federal tax hikes during the past decade have made casual and commercial smugglers willing to skirt the law.
 "Prop. 10: Cigarette Tax Initiative Squeaks Through in California," Reuters, November 4, 1998.
 Milo Geyelin, "Forty-Six States Agree to Accept $206 Billion Tobacco Settlement," Wall Street Journal, November 23, 1998.
 William Orzechowski and Robert Walker, The Tax Burden on Tobacco, Historical Compilation 40 (2004), 249.
 Smartvoter.org, "Proposition 86: Tax on Cigarettes, State of California," (League of Women Voters of California Education Fund, November 14, 2006), http://www.smartvoter.org/2006/11/07/ca/state/prop/86/, accessed October 4, 2008.