Colorado voters rejected a proposition on the November 2016 ballot asking for a massive tax increase on cigarettes sold in the state.
The ballot question, Amendment 72, asked 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. If approved, the additional revenue would have been used to increase spending on Medicaid and other entitlement programs.
Draining Wealth from Taxpayers
Mike Krause, director of public affairs at the Independence Institute, says Colorado taxpayers turned down a costly transfer of wealth from taxpayers to government employees.
“Amendment 72 was an enormous tax hike,” Krause said. “Supporters were hoping to suck over $300 million per year out of the productive private sector and into the unproductive public sector. It is doubtful that the revenues would have been as high as assumed, mostly because smokers have more choices these days, such as smoke-free and vaping alternatives. Had the tax passed, many smokers, especially lower-income smokers, would likely have switched over to one of these alternatives, as many already have.”
‘Clearly a Revenue Grab’
Krause says the ballot question was more about grabbing cash than helping people.
“Amendment 72 was pretty clearly a revenue grab, and a big one,” Krause said. “Had this actually been about getting people to stop smoking, the measure would have directed the legislature to allocate the money to evidence-based programs proven to reduce smoking. The measure instead purposefully locked the new spending by two Colorado state agencies into the constitution, outside the purview of the legislature, with the lion’s share going towards new and expanded programs that have little or nothing to do with tobacco or smoking. Colorado voters saw through the smokescreen and shot the measure down.”
Ineffective Tax Policy
Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, says sin taxes, such as the one proposed in Colorado, aren’t as effective as lawmakers often claim.
“Sin taxes don’t change behavior to the degree that the political class believes,” LaFaive said. “Too often, politicians look at the after-tax hike change in legal paid sales and shout, ‘See, our tax hike worked; people are quitting.’ They discount or ignore that those legal, paid sales don’t mean that people are quitting. They just switch to other sources, including the illicit ones.”