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Inside the Ballot Box: Proposition EE raises taxes on tobacco products

Proposition EE was referred to the ballot by the 2020 General Assembly
2020_07_29_LL_inside_the_ballot_box
Photo by Marcia Martin

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Proposition EE was referred to the ballot by the 2020 General Assembly

Shouldn’t vaping products be taxed?

Colorado today only taxes standard tobacco products, not e-cigarettes and other so-called reduced-risk products. Colorado charges excise taxes on standard tobacco products (cigarettes, cigars and other tobacco products intended to be smoked) based on the manufacturer’s suggested price.  This currently amounts to 40% of the product price, or 84 cents a pack on cigarettes. Nicotine delivery systems like e-cigarettes and vaporizers (vapes), which are supposed to provide nicotine with reduced health risks, are not subject to any excise tax.

To be clear, there are still state and local sales taxes on all these products, and federal excise taxes on some nicotine products.

Proposition EE creates a new tax on nicotine delivery systems, and incrementally raises the tax on tobacco products, too. Equally importantly, it defines funds that determine how the new revenues will be used.

Like Amendment C discussed last week,  Proposition EE is a legislative referral.  Nobody petitioned to get this proposition on the ballot. It was introduced in the post-lockdown session of the 2020 Legislature as HB20-1427. It passed mostly on party lines at the very end of the session, and was signed into law by Gov. Jared Polis on July 8. Because the bill increases and adds taxes, the governor’s signature only places the proposition on the November ballot. It won’t become law unless it passes on Nov. 3.

Details, details

It’s worth knowing there would have been a citizen’s initiative if the Legislature had not passed HB20-1427. No fewer than 18 similar citizens’ initiatives were filed with the Colorado Legislative Council in January. The backers of these initiatives planned to agree on only one of them for signature gathering later in the season, but the passage of HB20-1427 ended the need for that. All the measures were similar, differing mainly in the size of the tax increases for which they called.

Proposition EE would tax vaping products for the first time in Colorado. This may be the most important provision it contains, because Colorado has more teenage vape users than any other state. That’s right — we’re No. 1, and it’s not a good thing. While liquid/vapor nicotine delivery systems are arguably less unhealthy than tobacco products, they are not good for you, either. All the negative cardiovascular effects are still present.

The excise tax on nicotine-bearing vape products would begin at 30% of manufacturer’s retail price in 2020, and increase to a maximum of 62% by 2027. Adults who can’t smoke tobacco products for health reasons and want to vape as a method of weaning themselves away from tobacco object to this. However, there does not appear to be anything in this statute that prevents a subsequent medical exemption for such individuals from being enacted by the Legislature.

Proposition EE also raises the taxes on traditional tobacco products. Overall, Colorado ranks 40th in taxes on tobacco products, which include cigars, cigarettes, pipe tobacco and chewing tobacco. With standard Colorado weird, the first 20% of the excise tax on tobacco is mandated by the Constitution. Proposition EE can’t touch that. But there’s an additional 20% of the manufacturer’s retail price that is statutory. Proposition EE would ramp that up incrementally, until by 2027 it would match the tax on vape products: 62%.

If Proposition EE passes, Colorado would still have a very low tobacco excise tax. Assuming no other state changes its rate by 2027, Colorado would be 36th, tied with Kentucky. Colorado has not raised taxes on tobacco for more than 10 years.

The good stuff

If passed, Proposition EE is expected to increase Colorado net revenue by approximately $83 million in fiscal 2020-21, and by $168 million in fiscal 2021-22. You can read the fiscal note here.

The statutory uses of the new revenue would be as follows:

  • To make up for other lost revenues to the public school system caused by the COVID-19 pandemic;

  • To support programs of education on tobacco’s health impacts;

  • To supplement Colorado’s voluntary preschool program and increase the free availability of this program;

  • To maintain funding levels for other programs that receive funding from taxes on tobacco products.

Pros and cons

No Blue Book drafts have been published for this proposition as of this writing.

Pro 

This statement of support was issued by the Colorado Children’s Campaign: “This bill will offer additional preschool programming to children from families with low incomes and to children at-risk of entering kindergarten with low levels of school readiness. This will allow targeted resources to children who benefit most from high-quality early childhood education. ... The measure would also have substantial impact on Colorado’s highest in the nation rate of youth vaping by putting the price of vaping and tobacco products out of reach. In Colorado, 5,100 people die each year from smoking, and 91,000 kids under 18 right now will eventually die from smoking. Colorado also has the nation’s highest rate of nicotine vaping among youth, with over 27% of high school students using e-cigarettes.”

Con

No organization has officially announced opposition to this proposition as of this writing. One may speculate that persons attempting to stop smoking using vapes may be harmed by this additional tax. This could be corrected by a statutory exemption for persons with a prescription or by manufacturer’s rebates.

If you find a published statement in opposition, be a pal and post a link in the comments.

My take

OK, Mama raised a freethinker, and so I have a hard time with “sin taxes” in general. But this freethinker’s bleeding heart loves luxury taxes. Taxes on nicotine products are both. What a dilemma.

Protecting the young and impulsive from their own bad choices is hardly ever wrong. And funneling money into child care is an especially good thing right now, because the pandemic has essentially made preschool financially impossible. Logistically impossible, too.

So even if you’re a nicotine user, have a heart. We need this revenue to make kids and young parents whole as we all struggle through COVID-19 together. And if you’re not a user, this is a no-brainer. Vote yes on Proposition EE. 




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