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Only a smokescreen? Tobacco industry stands down as Colorado, Oregon hike cigarette taxes

Vignesh Ramachandran, Kaiser Health News on

Published in News & Features

Big Tobacco did something unusual in Marlboro Country last fall: It stood aside while Colorado voters approved the state’s first tobacco tax hike in 16 years.

The industry, led by Altria Group, one of the world’s largest tobacco companies, has spent exorbitantly in the past to kill similar state ballot initiatives. In 2018, Altria’s lobbying arm spent more than $17 million to help defeat Montana’s tobacco tax ballot initiative. That same year, it spent around $6 million to help defeat South Dakota’s similar measure.

And four years ago, Altria was the leading funder in a successful $16 million campaign to quash Colorado’s previous proposed tobacco tax increase.

In November, by contrast, Altria didn’t spend a penny in opposition and Colorado voters overwhelmingly approved the tax with two-thirds support. Likewise, in Oregon, Big Tobacco stayed on the sidelines while a tax hike passed there.

The tax measures are major wins for anti-smoking advocates after a string of defeats but, in an example of how politics makes strange bedfellows, Colorado’s tax might not have been possible without Altria’s help. And, advocates said, the way those measures passed could provide a blueprint for states to follow in future elections.

In Colorado, Altria, the parent company of Marlboro cigarette maker Philip Morris, insisted that a minimum price be included in the proposal, according to The Colorado Sun, citing emails between political consultants and Gov. Jared Polis’ office. So while supporters see an increased tobacco tax as more revenue for the state, a disincentive for kids to smoke and a win for public health, the measure could also allow America’s premium tobacco companies to gain market share.

 

The Colorado measure will increase the total state-levied tax from 84 cents to eventually $2.64 per pack by 2027. The tax rate on vaping products, not currently taxed, will be 30% of the manufacturer’s list price in 2021, gradually increasing to 62% by 2027. The proposition also set the minimum price per pack of cigarettes at $7 as of Jan. 1 and that floor rises to $7.50 in 2024. The change could effectively help premium cigarette companies corner the market, since discount cigarettes would rise to at least $7.

Discount cigarette companies Liggett Group, Vector Tobacco and Xcaliber International — which funded opposition to the tax initiative, Proposition EE — tried to sue the state over the minimum tax provision, alleging “Philip Morris will reap huge benefits from the new legislation” and the changes will “destroy their ability to compete in Colorado.” In December, a federal judge rejected the company’s request for a preliminary injunction. A spokesperson for Liggett said the company plans to appeal.

“When it came to entities like Altria and other stakeholders that we engaged in the legislative process, I think that they saw the writing on the wall,” said Jake Williams, executive director of Healthier Colorado and one of the key organizers behind Proposition EE. “And it helped us get through the legislative process, not just with Democratic votes, but Republican votes to refer the measure to the ballot.”

Altria officials said in a statement that their tobacco companies oppose excise tax increases, but they did not say whether they had worked with Colorado lawmakers.

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