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Proposition II: What to do with excess tax revenue from tobacco and nicotine products?

 Proposition II is one of two statewide ballot measures in front of Colorado voters this year.
Maeve Conran
Rocky Mountain Community Radio
Proposition II is one of two statewide ballot measures in front of Colorado voters this year.

In 2020 Colorado voters approved Proposition EE, which increased taxes on cigarettes and tobacco products.

Proposition II asks voters to let the state keep the almost $24 million in tax revenue from tobacco products and spend it on preschool programs, instead of refunding it to tobacco wholesalers and distributors.

A 'yes' vote also means the tax rates will stay at their current levels, and a ‘no’ vote means taxes on those products will drop 11.5 percent.

Sam Fuqua spoke with Colorado Sun reporter Sandra Fish about Proposition II.

Sam Fuqua: Well, in regards to the statewide ballot this November, most of the attention is focused on Proposition HH, but there's another one, II.

Joining us to give you a little more detail on that one is Colorado Sun correspondent Sandra Fish.

Sandra Fish: It's good to talk with you Sam. Yeah, II is not getting much attention.

Sam Fuqua: It might look familiar to voters who think, 'like, didn't we vote on this, like, three years ago?' So what is the connection between II and Proposition EE of 2020?

Sandra Fish: So yeah, we did approve Proposition EE in 2020, which increased the taxes on tobacco and nicotine products, especially prior to that, vaping products had not really been taxed.

And so it taxed this expanded range of nicotine products and also raised the taxes, you know, to set a minimum on the price of cigarettes.

Much of it was going to be raised for use for preschools, and the idea too was that the more you tax, the sin tax idea, and I don't mean grammar, s-i-n, that the more you tax things like cigarettes or alcohol, the less people will want to use them if they're too costly.

That is not what happened, and the money from this tax that people approved three years ago actually generated more money, like $24 million more in the past year, and we have TABOR, it requires voters to agree to keep that excess money.

Sam Fuqua: Normally under the Taxpayer Bill of Rights, that would have to be returned because it's over what was stated to be collected.

Sandra Fish: Yeah, and so voters have to agree to let the state keep that revenue and any future revenue from these increased taxes and use it to expand the preschool program that started this year.

I mean, let me mention that this is a little bit different than refunding like your property taxes or sales taxes or income taxes, you know, pretty much everyone pays those things, but not everyone is smoking or vaping or chewing or whatever, I am not.

And so how would you find those people to refund this money?

And this is the thing. It's like the refund mechanism would be determined by the Department of Revenue, but it'd probably just go back to wholesalers and retailers, and I guess they could give their customers a discount for a little while, but it's impossible to get it back to the people who originally paid this tax.

Sam Fuqua: Yeah, well, putting aside the fact that people smoked a lot more and vaped a lot more than was projected, which is a whole other public health question, we've got this almost $24 million in tax money that was collected over and above what was stated in Prop EE, and it was designed to fund universal preschool, right, in Colorado?

Sandra Fish: Yes.

Sam Fuqua: If approved, it would be essentially, you know, almost $24 million extra tax dollars that can be directed to this universal preschool program?

Sandra Fish: Yeah.

Sam Fuqua: And we are not aware of any organized opposition to the measure. Has anybody come out specifically to oppose this?

Sandra Fish: If you ask the Independence Institute and John Caldera, a Boulder resident, he's opposed to it, but they're not focusing on that. The Centennial Institute sent out a ballot guide opposing this.

But the conservative groups are really, really focusing on trying to defeat HH. There just isn't any organized opposition to this.

And the supporters of this have a (campaign), it's called Preschool for All Coloradans, and they've raised about $335,000 and spent maybe half of that.

And so, you know, they're out there, I think, doing digital ads and things like that. But in the past, I think you've had similar things like this, usually voters look at the cigarette tax and go, 'yeah, we hate cigarettes.' I mean, or, you know, 'yes, tax those things', and position EE passed with like, two thirds of the vote, at least, three years ago.

So, you know, this just isn't a big deal for conservatives. They'd rather deal with the more broad taxing issues.

Sam Fuqua: These sin taxes are interesting in that if they have the intended effect of making, in this case, tobacco, nicotine, vaping products more expensive and thereby curtailing some use, a public health benefit, they're not a reliable source of funding for whatever the money is directed to, right? Because it's going to go down, theoretically.

Sandra Fish: That's true. And that was the theory behind this. You know, it's interesting because when the legislature put this on the ballot, all Republicans opposed it and three Democrats did.

And I talked to one of them, Representative Stephanie Vigil from Colorado Springs, and they said that their problem with this, they will vote for II in favor of it, but they said, 'really when you increase taxes on things like this, it impacts certain people, often lower-income people. It's a regressive sort of tax.'

And so that's why they voted against it. And it isn't, as you can see, that helpful in getting people to quit smoking or using nicotine products.

So that's a different viewpoint on this whole thing.

It's interesting because the original tax approved in 2020 was opposed by discount cigarette makers because it set this floor that the minimum you had to charge for a pack of cigarettes was something like $7.60 or something.

And those companies had been selling cigarettes for less, but it was a deal cut with Altria, one of the largest tobacco product producers, they cut this deal and Altria didn't oppose the tax increase.

Sam Fuqua: All right, well, here we are, three years later, voters deciding on Prop II to keep the additional tax money that's been raised by Prop EE three years ago on tobacco products, nicotine products, cigarettes, vaping.

Again, no organized opposition, so if you have your crystal ball, Sandra Fish, think it's gonna pass?

Sandra Fish: I would expect so because the predecessor to it passed overwhelmingly, and I think most people see preschool and think, 'yay, good,' and see cigarettes and go, 'boo, bad.'

But that's just my thought. I'm not a predictor person, but I did just predict that it will pass, so.

Sam Fuqua: Well all will be known next week. Sandra Fish is a correspondent for the Colorado Sun. Thanks for speaking with us.

Sandra Fish: Great to talk with you Sam.

This story from KGNUwas shared via Rocky Mountain Community Radio, a network of public media stations in Colorado, Wyoming, Utah and New Mexico including Aspen Public Radio.

Copyright 2023 Aspen Public Radio . To see more, visit Aspen Public Radio.

Sam Fuqua