DENVER – In the weeks ahead of the Nov. 8 General Election, Denver7 will profile most of the state ballot measures and initiatives. In this edition, we take a look at Amendment 72, which would increase the taxes on cigarettes and other tobacco and distribute the new tax money to various health-related programs.
Here are 7 things you need to know about Amendment 72:
1. WHAT ARE THE EXISTING TAX RATES ON CIGARETTES AND TOBACCO?
Every pack of cigarettes in a pack of 20 is currently taxed at $1.01 by the federal government, and an additional $0.84 by Colorado.
Non-cigarette tobacco (excluding e-cigarettes) is also taxed. The federal government taxes those products, which include cigars, pipe tobacco, dip, snuff and chewing tobacco, based off the product’s weight or price, and Colorado taxes them at 40 percent of the manufacturer’s price.
Local governments are allowed to collect both cigarette and tobacco taxes, but no Colorado local government has taken the cigarette tax since 1973 in order to take a share of the state revenue. Some local governments still collect on the tobacco tax.
Sixty-four cents of the state cigarette tax goes to health programs, including Medicaid, child health care and tobacco education programs. The remainder of the money goes to the state sharing program.
Tobacco taxes are also spent on health programs and state programs – 50 percent to each.
The state collected $200.3 million in cigarette and tobacco taxes in the 2015-16 budget year, and spent $143.7 million on health programs.
2. WHAT WOULD THE NEW TAX RATES BE?
If approved, Amendment 72 would increase the state cigarette tax from $0.84 per pack to $2.59 per pack, which means cigarette smokers will pay an extra $1.75 per pack.
The non-cigarette tobacco tax would increase from 40 percent to 62 percent.
The additional tax money will go to medial research, tobacco-use prevention, doctors and clinics in rural or low-income areas, veterans’ services and more health programs.
The new tax revenue would be exempt from the state’s revenue limit written into the constitution.
3. WHERE WOULD THE NEW TAX MONEY GO?
As stated in Section 2, the additional tax money will go to medial research, tobacco-use prevention, doctors and clinics in rural or low-income areas, veterans’ services and more health programs.
More specifically, the money will be broken down as follows:
The health programs that already get money from the tobacco and cigarette taxes will see 18 percent of the new taxes, but that will be capped at $36 million. Any additional money that constitutes 18 percent of the new tax revenue beyond $36 million will be dispersed to the other programs receiving the new revenue.
Research grants meant for studying tobacco-related health issues will receive 27 percent of the new tax money.
Tobacco education and prevention programs will receive 16 percent; grants for veterans services, like health care and homelessness prevention, will receive 14 percent of the new revenue.
Ten percent of the new revenue will go to mental health and substance abuse treatment and prevention services for children and adolescents; another 10 percent will go to the construction of or improvements to community health centers serving low-income residents.
And the final 5 percent of the new tax revenues generated would go toward helping health care professionals working in low-income parts of Colorado repay their student loans and receive more training.
The Colorado Legislature would be required to keep funding levels for the above-listed programs the same as they were in 2016 should Amendment 72 pass. The new tax revenues would be in addition to current funding levels for such programs.
Each program is estimated to receive at least $17 million next year under the tax increases. For a full estimate of the revenue expected to be generated next year, check the chart below or the fiscal impact report.
4. SUPPORT FOR AMENDMENT 72
The main argument in favor of the amendment is that higher prices for tobacco products have historically led to decreases in smoking and tobacco use.
The Colorado Blue Book says the last tax increase, which was approved in 2004 and increased the tax on cigarettes to its current rate from 20 cents per pack and increased the tobacco tax rate from 20 to 40 percent of the manufacturing price, led to a 12.6 percent decrease in the number of cigarettes consumed per state resident.
Another argument in favor of the amendment is that the excess tax revenue would go to necessary health programs in the state, and would save money in the long term by offsetting medical costs for tobacco users.
Gov. John Hickenlooper supports the measure, as do a wide variety of health and medical organizations and businesses.
Colorado currently ranks 38th in the nation in its cigarette tax rates, meaning it is in the lower half of rates among all states. The state’s tax rate is almost $1 lower than the national average.
5. OPPOSITION TO AMENDMENT 72
The main arguments against approving Amendment 72 are that it would lock in spending to the programs specified above, which would theoretically lead to those programs being less-necessary if the aim of the amendment is achieved in helping decrease the number of smokers and tobacco users in Colorado.
The worry is that millions in tax dollars would be wasted should some of the anti-tobacco programs become unnecessary.
Some also worry that a higher tax rate on tobacco would affect mostly low-income residents, who are most likely to use tobacco in the first place. The argument there is that people living in poverty would continue to use tobacco despite the increased prices, thus spending an even larger percentage of their already-meager income on tobacco.
Still others argue that the billion-plus dollars sent to the state by tobacco companies over the past several years has been diverted by the state to other programs, and that if the state stopped doing so, it wouldn’t need to increase the state tax to fund the health programs.
6. MONEY FLOWS IN TO PRO, OPPOSITION CAMPAIGNS
Amendment 72 has seen among the largest cash donations in the state during this election season.
Its primary contributor is Altria Client Services LLC, which is what Phillip Morris Companies became in 2003. It is the parent company of Phillip Morris USA and International, as well as several other tobacco and wine companies.
Altria has donated almost all of the money to No Blank Checks and has contributed all of the money since the last week of August. Its most recent contribution to No Blank Checks was $6.2 million, which was given Oct. 7.
Of the $17.4 million raised, the PAC has spent nearly $9.7 million of the money. Much of the expenditures have gone to advertising, and the PAC has primarily used advertising agencies based in Sacramento, California. Boulder-based Young Ideas has received nearly $400,000 from the PAC for advertising services.
Its primary contributors are health-related companies and organizations. University of Colorado health gave the PAC $250,000 on Sept. 23; the Children’s Hospital of Colorado has given the PAC $200,000, and the American Heart Association has contributed at least $300,000 to the PAC and its pro-72 efforts.
Its largest expenditures have gone to Denver-based advertising company Bluewest Media. Colorado Springs-based Kennedy Enterprises has received nearly $500,000 from the PAC for various services.
7. OTHER STATES’ RATES AND LAWS
There are similar measures to increase tax rates on cigarettes and tobacco on ballots this year in California, Missouri and North Dakota.
One of Missouri’s ballot measures would increase the cigarette tax by 23 cents per pack by 2021. But it has another ballot measure voters will decide on that proposes a 60-cent tax increase by 2020.
Missouri has the lowest tobacco tax in the country, currently at 17 cents per pack. The average state tobacco tax rate is $1.75.
New York’s tobacco tax of $4.35 per pack of cigarettes is the highest in the U.S.
Colorado’s neighbors generally have higher taxes than it currently does as well: Arizona’s is $2 a pack; Utah’s is $1.70 per pack; New Mexico’s is $1.66 per pack; Kansas’ is $1.29 per pack and Oklahoma’s is $1.03 per pack.
Nebraska ($0.64 per pack) and Wyoming ($0.60 per pack) have tax rates that are lower than Colorado’s.
Stay posted to Denver7 for more upcoming reports on state and local ballot initiatives Coloradans will be voting on Nov. 8. Previous initiatives covered can be found below: