Bennet and Hickenlooper Should Oppose Taxing Working Families
Grier Bailey
Congressional leaders in Washington are furiously twisting arms to pass a massive $3.5 trillion spending bill to fund a host of new and existing programs. President Biden for his part says the largesse will cost nothing. Tell that to the millions of individuals and small businesses that will feel the brunt of dozens of tax increases that are on the table, particularly low- and middle-income earners. By most accounts the fate of the spending binge rests in the United States Senate. Colorado’s senators, Michael Bennet and John Hickenlooper, should not fall for the Washington math.
President Biden promised not to raise taxes on Americans who earn under $400,000 a year. Not “even by a dime” he said. Nonetheless, Congress is proposing to do just that through dramatic increases in tobacco taxes that will hit low- and middle-income adults hardest.
The tax hikes, which include doubling the federal excise tax on cigarettes and raising federal taxes on other tobacco products by as much as 2,000%.
Clearly, the proposed tax increases will break the President’s promise. In fact, 98% of the tobacco taxes will be paid by people who earn less than $400,000 a year. Tobacco taxes are the least progressive of all federal taxes.
Colorado voters recently passed the most aggressive Tobacco and Nicotine products increase in the state’s history, with the long-term goal of funding Pre- K education. It also established a minimum price floor for all Cigarette products. Now, in what only could be described as “political logic” cities across the state including Denver are considering banning the products that will fund pre- k education, The FDA through the PMTA process is essentially banning most vaping products and thousands of products are already illegal in Colorado as of a couple weeks ago.
According to a recent study by Chmura Economics & Analytics retail sales will decline by $801 million; employee wage income will drop by $630 million and job losses will top 14,000 as prices paid by adult consumer go up. The average national price for a pack of cigarettes would rise from $7.60 to $8.80, a 15.7% increase. The current average price of $1.13 for a single cigar would jump 92.8% to $2.18 each.
The over 1500 service stations and convenience stores we represent in Colorado will not be spared the economic fallout. According to the Chmura analysis Colorado store owners stand to lose as much as $29 million in revenue with a $10.7 million hit to labor income as prices rise and sales fall. Revenue that is used to help support living minimum wages, support environmental regulations and other things.
And while the federal government is raking in higher tobacco tax revenue, estimated to be $96 billion annually (though tobacco tax increases seldom deliver what their advocates predict,) state and local governments will lose as much as $1.5 billion as legal sales decline. Losses to Colorado’s state and municipal governments could total $23 million.
History has also shown that as tobacco taxes increase, tobacco sales move to illicit markets where taxes aren’t collected and age verification of buyers doesn’t happen. While consumers, retailers and Colorado governments will lose, all under a false promise of tapping our neighbors that use these products again, and again, and again.
The infrastructure package, is important, important enough that congress should find a “pay for” that doesn’t lie on the backs the small percentage of people that use these products and undercuts the viability of the initiative to fund pre-k education that Colorado supported.
Grier Bailey is Executive Director of the Colorado Wyoming Petroleum Marketers Association and Convenience Store Association.