Proposition EE – Taxes on Nicotine and Tobacco Products

The legislature wants to raise taxes, especially on vaping products which aren’t currently subject to a “sin” tax, but the voters in Colorado have to approve taxes so Prop EE is on your ballot. House Bill 1427 passed mostly along party lines with a late amendment to use some of the tax revenue to reduce housing insecurity.

All of the affected products are currently subject to sales tax. The numbers below refer to the changes in cigarette, tobacco and nicotine taxes as described in HB1427 and differ somewhat from the numbers in the Blue Book. Beginning on Jan 1, 2021, Proposition EE would increase or impose taxes in multiple steps with the final authorized tax increase to occur on July 1, 2027.
--Per cigarette: from 1 to 6.5 to 8 to 10 cents
--Statutory tobacco products: from 20% to 30% to 36% to 42% of manufacturer’s list price (MLP)
--Nicotine (vaping) products: new 30% to 35% to 50% to 56% to 62% of MLP

Prop EE would also establish a minimum tax on moist snuff products and a new tax rate on modified risk tobacco products (MRTP). MRTP are intended to replace products with worse health risks, but Prop EE prohibits vaping from being classified as MRTP for state tax purposes, even if vaping products receive an MRTP federal designation.

Colorado consumers making online purchases from out-of-state retailers would be subject to these new or increased taxes.

Prop EE sets a minimum price for packs and cartons at $7 and $70 respectively, later rising to $7.50 and $75.

New tax revenue would help fund many services: preschool, rural schools, some K-12 education, affordable housing assistance, eviction legal assistance, local governments, tobacco education programs and the general fund.

Recommendation: Yes/For

Colorado has been called the healthiest state in the nation, but our high youth vaping rates go against that image. It’s time to tax vaping products. With medical costs so high, requiring people to pay more on the front end for unhealthy products doesn’t seem so unreasonable and has been shown to change societal behavior for the better.

Establishing a high minimum retail price for packs and cartons is considered a bone thrown to the name-brand cigarette companies, especially the Altria Group, so that they would go along with this measure. Altria successfully fought Amendment 72’s proposed tax increase in 2016. The vast majority of the opponents’ funding has come from Liggett, a large US tobacco company that markets discount cigarettes.

Reducing competition and increasing prices is not usually a desirable goal, but if the item on offer comes with a surgeon general’s warning, perhaps we do want to discourage its purchase and consumption.

Website for the Yes side – A Brighter, Healthier Future for Colorado's Kids
https://forcokids.com/

Website for the No side – No on EE – A Bad Deal for Colorado
No known website – Info on an opponents’ website appreciated.


Approved Ballot Language

Proposition EE (STATUTORY)

SHALL STATE TAXES BE INCREASED BY $294,000,000 ANNUALLY BY IMPOSING A TAX ON NICOTINE LIQUIDS USED IN E-CIGARETTES AND OTHER VAPING PRODUCTS THAT IS EQUAL TO THE TOTAL STATE TAX ON TOBACCO PRODUCTS WHEN FULLY PHASED IN, INCREMENTALLY INCREASING THE TOBACCO PRODUCTS TAX BY UP TO 22% OF THE MANUFACTURER'S LIST PRICE, INCREMENTALLY INCREASING THE CIGARETTE TAX BY UP TO 9 CENTS PER CIGARETTE, EXPANDING THE EXISTING CIGARETTE AND TOBACCO TAXES TO APPLY TO SALES TO CONSUMERS FROM OUTSIDE OF THE STATE, ESTABLISHING A MINIMUM TAX FOR MOIST SNUFF TOBACCO PRODUCTS, CREATING AN INVENTORY TAX THAT APPLIES FOR FUTURE CIGARETTE TAX INCREASES, AND INITIALLY USING THE TAX REVENUE PRIMARILY FOR PUBLIC SCHOOL FUNDING TO HELP OFFSET REVENUE THAT HAS BEEN LOST AS A RESULT OF THE ECONOMIC IMPACTS RELATED TO COVID-19 AND THEN FOR PROGRAMS THAT REDUCE THE USE OF TOBACCO AND NICOTINE PRODUCTS, ENHANCE THE VOLUNTARY COLORADO PRESCHOOL PROGRAM AND MAKE IT WIDELY AVAILABLE FOR FREE, AND MAINTAIN THE FUNDING FOR PROGRAMS THAT CURRENTLY RECEIVE REVENUE FROM TOBACCO TAXES, WITH THE STATE KEEPING AND SPENDING ALL OF THE NEW TAX REVENUE AS A VOTER-APPROVED REVENUE CHANGE?

YES/FOR ____
NO/AGAINST ____

HB20-1427 to refer Proposition EE to the voters
https://leg.colorado.gov/sites/default/files/documents/2020A/bills/2020a_1427_rer.pdf