Democrats in the Colorado Legislature on Thursday introduced an 11th-hour bill that seeks to ask voters in November to raise taxes on cigarettes and start taxing other products that contain nicotine.
House Bill 1427 would ask voters to gradually – but significantly – raise the taxes over the next seven fiscal years.
Whereas taxes on a pack of cigarettes are now 84 cents, the bill would ask voters to allow the state to raise that amount to $1.94 starting next year. Starting in July 2024, taxes on a pack of cigarettes would then rise to $2.24 a pack. Then in July 2027 and moving forward, the taxes would be $2.64 a pack.
Nicotine products, including vaping devices and fuel, would be taxed at 50% of their manufacturer’s list price starting next year if voters sign off. Starting in July 2024, that would rise to 56% of the list price. Then in July 2027 and moving forward, the taxes would be 62% of nicotine products’ market list price
Vaping products aren’t taxed in Colorado.
The bill was introduced Thursday, a day before the Legislature was originally supposed to adjourn after returning for three weeks after a two-month-plus coronavirus pause. It appears lawmaking will stretch into the weekend now in order to accommodate HB 1427 and other last-minute legislation.
The legislation is very similar to a proposed ballot measure – Initiative 292 – that would enact a nicotine tax and raise the taxes on cigarettes to 62% of their manufacturer’s list price overnight.
HB 1427 has Gov. Jared Polis’ support.
“The governor strongly supports the initiated ballot measure, but it’s undeniable the state’s current revenue challenges require smart solutions such as this,” Conor Cahill, a spokesman for Polis, said in a statement. “He would sign the bill based on what’s in the introduced version if the Legislature sends it to his desk”
The tobacco industry is also coalescing around the measure. Amanda Wheeler, president of the Rocky Mountain Smoke Free Alliance, a vape shop trade organization, said lawmakers and groups pushing for the bill worked with tobacco interests to reach a consensus.
Wheeler said her organization doesn’t believe vaping products should be taxed, but that it realized the way the winds were shifting, which is why being at the table was so important.
“We recognize that taxes are coming,” Wheeler said. “We want to have a voice in that process.”
The measure was introduced with such haste that its 43 pages of text hadn’t been posted on the Legislature’s website before it was scheduled for its first committee hearing on Thursday afternoon.
Legislative fiscal analysts believe the proposed tax increase would net the state about $86 million in the 2020-21 fiscal year, which begins in July. In the next fiscal year, the state would collect more than $173 million.State Rep. Julie McCluskie, a Dillion Democrat and prime sponsor of the bill, said she hopes the bill will help bolster the state’s ailing budget, which has taken a major hit as a result of the coronavirus crisis. At first, revenue generated by the taxes will go toward backfilling the state’s coffers.
After that, revenue from the taxes would be distributed to fund health care, tobacco education, preschool and other programs.
If voters approve the tax increase, it will start being enforced in 2021.
The bill passed its first hurdle, the House Finance Committee, within about 20 minutes and on a 6 to 5 vote. Republicans voiced opposition to the speed at which it was released.
“We got this bill after we even sat down in here. It’s 43 pages. I just can’t support it right now. It sounds good, but I just can’t support it right now,” said Rep. Janice Rich, a Grand Junction Republican.
The bill comes after a similar attempt to ask voters to raise cigarette taxes and enact a nicotine tax last year failed. Democrats in the Colorado Senate rejected the bill in the final days of the 2019 lawmaking term, in part because of concerns that it was regressive.
Last year’s legislation had the support of Polis. The tobacco industry lobbied heavily against the measure.
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