Colorado Governor and Legislators Propose Tobacco Tax Increase

Voters in Colorado could have the final say on whether to raise the state’s tobacco taxes after a pair of legislators introduced HB 19-1333, which seeks to create a ballot measure to raise the taxes on cigarettes and other tobacco products while establishing a tax on e-cigarettes.

Currently, other tobacco products such as premium cigars are taxed at the rate of 40 percent of the wholesale price. For a cigar with an MSRP of $9.50, that means it would cost approximately $13.30 at the register before any additional sales taxes are applied, according to halfwheel estimates. The proposed increase would raise that rate to 62 percent of the wholesale price, meaning that same cigar would now cost $15.39.

The cigarette tax would also go up drastically, more than tripling from its current rate of 84 cents per pack to $2.59. Vaping products would also get the new 62 percent tax rate applied to them.

The bill was introduced by Rep. Yadira Caraveo (D-31) and Sen. Rhonda Fields (D-29) and has received the support of Gov. Jared Polis.

If approved by the Colorado General Assembly and signed by the governor, it would create a ballot issue for voters to decide in the Nov. 2019 election. Should they approve it, it would give the state the authority to begin implementing the increase at an as-yet undetermined date.

It has been estimated that the increase would generate nearly $300 million a year for the state, with the revenue generated from the tax increase earmarked for behavioral health services for children and youth, health care affordability and accessibility, the Colorado preschool program expansion and enhancement, and the newly created Colorado expanded learning opportunities program.

The bill is currently awaiting further action in the House Finance Committee.

Colorado voters defeated a similar proposal in 2016, with 53 percent of voters opposing it. However, that proposal did not include a tax on e-cigarettes and vaping products.