Colorado voters will vote on a proposition on the November ballot that would, if passed, impose a huge tax increase on cigarettes sold in the state.
The ballot question, Amendment 72, asks voters to approve raising the state’s excise tax on cigarettes from 84 cents per pack to $2.59 per pack, a 208 percent increase.
Shrinking Tax Base
Kevin Callison, an assistant professor of economics at Grand Valley State University, says the size of this proposed tax increase shows the effect of tobacco tax hikes on public health is small and getting smaller.
“We’re at a point where we have the smallest share of our population, at any point in time, smoking cigarettes,” Callison said. “This group that continues to smoke, they seem to have a very strong preference. Colorado has a relatively low smoking rate already, lower than the national average, so you may see a different response in a place like Colorado than you would in a place where there’s a higher proportion of smokers.”
Shopping Trips
Callison says when taxes on goods go up, consumers go shopping elsewhere.
“There is pretty strong evidence that people are doing the cross-border purchasing when it’s relatively easy to do,” Callison said. “It depends on geography, where the population centers are in the state, how close they are to the lower-priced border. You certainly see that in some areas. For example, Indiana and Chicago is a big one because Chicago has a high tax rate and Indiana has a relatively low tax rate.”
Locking in Higher Taxes
Mike Krause, director of public affairs for the Independence Institute, says the tax hike is about guaranteeing more revenue for the government.
“What Amendment 72 will do will lock in the tax increase and the spending obligations into our [state] constitution, and the only way to ever tweak that will be to run another ballot measure,” Krause said. “If the measure is successful in decreasing smoking, then tax revenue will also decrease, but the programs will remain. This is the essence of the problem; it’s horrible fiscal policy that will be locked permanently into our constitution, so the legislature can never go back and take a look at it.”
Further Tax Hikes Predicted
Krause says the cigarette tax hike will lead to more tax increases and greater spending.
“What happens when we hit the line where the revenues can no longer support the programs?” Krause said. “Well, they’re not just going to fold up shop and go away. Government never does that, so they’ll lobby the legislature for a general fund appropriation. When the revenues go away, the spending obligation stays.”
