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Colorado voters approve tax increase, new taxes on tobacco and nicotine with Prop. EE's passage

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Posted at 9:24 PM, Nov 03, 2020
and last updated 2020-11-03 23:24:12-05

DENVER – Colorado voters approved sweeping new taxes on nicotine and tobacco products that are expected to raise hundreds of millions of dollars for the state and significantly raise the price of cigarettes and other tobacco and vaping products.

The Associated Press called the race around 8:45 p.m. Tuesday, with 69% of Coloradans voting in favor of Proposition EE’s passage, compared to 31% who voted against it.

The measure was referred to Colorado voters by state lawmakers as part of HB20-1427 as the state tries to address its high teen vaping rates and other tobacco and nicotine use.

MORE: Live updates: Colorado votes in the 2020 General Election

Proposition EE’s approval will create a new tax for nicotine and vaping products and increase existing taxes on cigarettes and other tobacco products, which Legislative Council Staff estimated would raise around $250 million in revenue this fiscal year and next.

A pack of cigarettes will go from being taxed at $0.84 per pack up to $2.64 per pack by 2027, when cigarettes will cost at least $7 per pack in the state.

Tobacco products will see the current 40% tax rate increase to 62% by that year, and the new nicotine tax will be applied at 30% starting in 2021 and go up to 56% starting in July 2024.

Passage of the measure also adds price floors for tobacco products. The minimum price for moist snuff products will be $1.48 per container and will increase to $2.26 by 2027.

Similarly, the minimum price for a pack of cigarettes will be $7 in 2021 and will increase to $7.50 beginning in 2024.

The added revenue is allowed to be spent on a new cash fund for rural schools, preschool funding, tobacco education programs, housing and health care.

Prop. EE is expected to generate $175.6 million in revenue during the 2021-22 budget year and $275.9 million yearly when the tax is fully phased in in 2027, according to Legislative Council Staff.

State lawmakers passed a bill in the final days of the 2020 legislative session to put the question on the ballot.

But as The Colorado Sun reported, involved in the negotiations was Altria, a tobacco giant that manufactures Marlboro cigarettes and which the Sun reported could benefit from the cigarette floor price and a tax increase exemption for a narrow window of products.

Passage of Proposition EE represents the first time in 16 years voters statewide have decided to raise tobacco taxes, though some local municipalities have in recent years. Most recently, a ballot initiative to raise the tax failed in 2016 after Big Tobacco spent more than $16 million on campaigns against the idea.

Roughly 14.5% of Coloradans use tobacco products.

Proponents argued that passage of Proposition EE will help cut Colorado’s teen vaping rates, which are among the highest in the nation, and bring revenue to early-childhood education and rural schools at a time when the money is needed and the state pushes for more widespread pre-K education.

Dr. Arnold Levinson, a professor at the Colorado School of Public Health, noted in a pre-election interview that Colorado saw a 5% reduction in cigarette consumption after the 2004 tax increase passed compared to the previous 15-year average.

Opposition to the measure had come from people opposed to Altria’s involvement and from groups who say that tobacco and nicotine taxes are regressive taxes that affect more low-income people than people who have higher incomes and are statistically less likely to use tobacco and nicotine products.

This is a developing news story and will be updated.