A group of Colorado legislators has introduced a bill that would allow voters to decide whether to increase the tax rate on cigars and other products over the coming years, leading to significantly higher costs at the register.
Currently, the tax rate on cigars in Colorado is 40 percent of the wholesale price, which means that a cigar with an MSRP of $9.50 costs approximately $13.30 at the register before any additional sales taxes are added. HB20-1427 would increase that over the course of the next two years, first to 50 percent in January 2021, then to 56 percent in 2024, and finally 62 percent in 2027. That same $9.50 cigar would then cost $15.39, by halfwheel estimates, again before any sales or local taxes are added.
The bill would also levy the same tax on nicotine delivery products, such as e-cigarettes and vaping devices. Currently, those are untaxed in Colorado.
Cigarettes are also targeted in the bill. First, it would create a new minimum price of $7 for a pack. The tax on cigarettes would then go up in stages; currently it is 84 cents per pack, and the bill proposes raising that to $1.94 as of Jan. 1, 2021, then to $2.24 per pack in 2024, and finally $2.64 in 2027.
The bill also includes language that would lower the tax rate on a certain product by 50 percent if it were to get a Modified Risk Tobacco Product (MRTP) designation from the Food and Drug Administration (FDA).
The legislation is sponsored by Rep. Yadira Caraveo, D-31; Rep. Julie McCluskie, D-61; Sen. Rhonda Fields, D-29; and Sen. Dominick Moreno, D-21. It has been referred to both the House Finance and Appropriations Committees, and must get through the legislative process in order to end up as a question on the November ballot, meaning that voters would ultimately decide. That means that it would need to be approved by Saturday, when the session is scheduled to wrap up.
Of note, the bill is quite similar to an initiative that was recently approved for signature gathering, though that petition does not include the incremental increases and would raise the tax rate to 62 percent as of Jan. 1, 2021. The organizers must gather at least 124,632 signatures by Aug. 3 in order to qualify the petition for the November ballot.