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New California sales tax on e-cigarettes will fund CalHealthCares Student Loan Repayment Grant, other health care programs

October 12, 2021 619

Quick Summary:

CDA supported the legislation, which imposes a 12.5% retail sales tax on the sales price of all e-cigarettes sold in California. The bill also created the California Cigarette Excise Tax Fund and requires all revenues, interest and penalties to be deposited into the tax fund on an ongoing basis for distribution to a half-dozen programs. Forty-eight percent of tax moneys will fund the CalHealthCares Student Loan Repayment Grant.

A bill imposing a sales tax on e-cigarettes sold in California was signed into law by Gov. Gavin Newsom and will take effect July 1, 2022. The new tax will provide ongoing funding for the CalHealthCares Student Loan Repayment Grant and other education and health care programs in the state, including programs funded by the California Children and Families Trust Fund and the newly created Small and Rural Hospital Relief Fund.

CDA supported the legislation, Senate Bill 395, which imposes a 12.5% retail sales tax on the sales price of all e-cigarettes sold in California. Retailers must collect the tax at the time of consumers’ purchase.

The bill also created the California Cigarette Excise Tax Fund and requires all revenues, interest and penalties to be deposited into the tax fund on an ongoing basis for distribution to a half-dozen programs.

48% of tax moneys will fund student loan repayment grant

The Proposition 56 Medi-Cal Physicians and Dentists Loan Repayment Act, also known as the CalHealthCares Student Loan Repayment Grant, will receive 48% of the new tax moneys.

With CDA’s strong support, voters overwhelmingly passed Proposition 56, the state tobacco tax, at the polls in November 2016.

Proposition 56 established a tax of $2.87 on a pack of cigarettes and directed the California Department of Tax and Fee Administration to tax e-cigarettes under a methodology that was equivalent to that of traditional cigarettes. However, the current methodology imposed on e-cigarettes is only half of the methodology used for traditional tobacco, although vapor and e-cigarette companies have made a 1-to-1 comparison of their products to traditional cigarettes, advertising and promoting that one e-liquid pod is equal to one pack of cigarettes.

The new law taking effect in July 2022 ensures that the tax on e-cigarettes is equal to that of combustible cigarettes.

Proposition 56 tax revenues have not only provided supplemental Medi-Cal Dental Program reimbursements to dentists but have funded the CalHealthCares grant program for three years.

In August, the California Department of Health Care Services awarded $69.4 million toward student loan repayments for 249 physicians and 41 dentists. Awardees receive up to $300,000 toward repayment of their educational debts in exchange for their commitment to serve Medi-Cal beneficiaries for at least five years. 

Proposition 56 provided for five rounds of funding; now, through the CDA-supported retail sales tax on e-cigarettes, the CalHealthCares program will have ongoing funding. The fourth CalHealthCares grant application period will open Jan. 24, 2022.

Revenues support new residency, clinical rotation positions

The e-cigarette tax revenues will fund other programs that support education and health care access. For example, 7% of the tax moneys will fund a medical education program jointly operated by the University of California, San Francisco School of Medicine and other universities. That program will, in part, establish new residency and clinical rotation positions for the program’s participants and graduates in the San Joaquin Valley.

Newsom signed the bill into law Oct. 4. Complete details on how all tax moneys will be distributed are available in the bill’s text.

Learn more about CDA’s advocacy work and read about other legislation CDA has sponsored or supported on behalf of dentistry and public health.