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Colorado Tobacco Revenue Up in Smoke

Posted on: Tuesday, 16 August 2005, 03:00 CDT

A sharp increase in the smoker tax boosted cigarette and tobacco tax collections by nearly 200 percent in the first seven months of the year, state Department of Revenue figures show.

But the $76 million gain is a pace that, if continued, means tobacco taxes will fall $42 million short of the $172 million annual increase predicted by the tax's proponents.

Dan Hopkins, spokesman for Gov. Bill Owens, called the projection "overly optimistic."

"That's one reason the governor was insisting there be a reserve, because in every state where you dramatically increase the tax on tobacco consumption, tax revenue has correspondingly decreased," he said.

The constitutional amendment approved by voters in November raised the tax on a pack of cigarettes from 20 cents to 84 cents and increased the tax on other tobacco products by 20 percent.

But revenue predictions aren't panning out in the new tax's first year. Records show that tobacco taxes brought in $114.5 million from January through July. Tax advocates' projections showed total tobacco tax collections should've been at about $139 million after seven months.

It's impossible to know why the tax isn't yielding as much as was forecasted, but officials speculate some smokers have quit and others may be buying tobacco in neighboring states or on the Internet. Some smokers have turned to rolling their own cigarettes. While the tax also applies to loose tobacco, those products are priced lower than ready-made cigarettes and generate less tax money than cigarettes.

What impact the shortfall will have on planned spending of the tax money isn't clear. It's being used to fund health care programs, tobacco cessation and preventive care, with a sizeable chunk placed in a reserve fund.

Gov. Owens insisted on the reserve so programs would continue to be funded as people quit smoking or found other ways to buy.

Hopkins said by law the reserve must reach $80 million before money can be taken from it. If the fund dips below $40 million, the legislature must step in.

Spending on programs was suspended the first six months of this year to allow the reserve to build up, he said. Program spending began on July 1.

Cindy Parmenter, spokeswoman for the Colorado Department of Public Health and Environment, said so far her department hasn't been told to scale back tobacco programs, which are budgeted at about $36 million.

Because the amounts earmarked for programs were less than tax proponents proposed, there's no necessity to curtail program spending yet, Hopkins said.

CONTACT THE WRITER: 636-0238 or zubeck@gazette.com

Source: Gazette, The; Colorado Springs, Colo.

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