Proposition II poses a simple question to Colorado voters, or at least as simple as a tax measure can be: Can the state keep nearly $23.7 million to pay mostly for preschool programs, or does it need to return that money to tobacco wholesalers and distributors?
The money was collected from taxes on tobacco and nicotine products that voters approved with 2020’s Proposition EE. State analysts projected that Prop. EE would generate about $186.5 million in new taxes during the first year; instead, the state collected $208 million. The taxes included higher tax rates for cigarettes and other tobacco products and a new tax on nicotine products, such as e-cigarettes and other types of vaping devices.
Colorado’s constitutional Taxpayer’s Bill of Rights requires the state to ask voters to keep tax revenue collected above published projections. Lawmakers put Proposition II on the ballot this past spring for voters to decide in the Nov. 7 election.
Here’s a quick look at the ballot measure.
What would Proposition II do?
If Proposition II passes, the state will keep the tax money. Tobacco and nicotine taxes also will continue to increase in line with the schedule set out by the 2020 proposition, with the state allowed to continue pocketing all of it.
For a standard pack of cigarettes, taxes will increase from $1.94 now to $2.24 in July, and again to $2.54 per pack in July 2027. Those rates include an 84-cent cigarette tax that predated Proposition EE.
Tax rates on other tobacco products and on nicotine products would increase from 50% of the price to 56% in mid-2024 and 62% in mid-2027.
In addition to keeping the $23.65 million that’s set aside for potential refunds, the state would be able to retain another $14.5 million in new tax revenue in the first half of next year and $32 million in the following full fiscal year, analysts say in the state’s Blue Book voter guide.
If voters vote down Prop. II, then the state will refund $23.65 million to tobacco wholesalers and distributors, including interest on what was collected, and the Proposition EE taxes will drop by about 11.5%.
Where would money from Prop. II go?
The money, as laid out in the earlier Proposition EE, will go mostly toward the state’s expanded preschool program if voters approve it, though $5.6 million will be transferred to the state’s general fund.
The preschool program currently provides at least 15 hours per week of education to nearly 50,000 3- and 4-year-old Coloradans. Proposition EE passed three years ago with more than two-thirds of the vote.
What do supporters say?
Proposition II is just the latest question put to voters under TABOR to allow the state to keep all the money raised by taxes that previously won voters’ approval. Arguments summarized by the Blue Book include that the measure will maintain tax rates and increases set by Prop. EE, ensuring the money goes to support the intended preschool programs and allowing more children to enroll each year.
What do opponents say?
Opposition arguments summarized in the Blue Book include that Proposition II amounts to an unnecessary expansion of government, since the new preschool program is already funded sufficiently to provide more than the minimum 10 hours per week promised by Prop. EE; and that it imposes a burden on people suffering from addiction by increasing taxes.
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