Extras on Excise: Colorado Governor Calls for Tax on E-Cigarettes to Protect Youth

On Nov. 2, 2018, Colorado Gov. John Hickenlooper (D) issued a proclamation designating November 2018 as “Vape-Free November” as a response to his concern over e-cigarette use among the state’s youth. Additionally, he signed an executive order the same date that calls on state agencies and the Colorado General Assembly to tax vape products to make them harder for young people to afford, following in the footsteps of nearly a dozen states that impose excise taxes on e-cigarettes.

According to Hickenlooper, electronic cigarettes pose a health risk similar to those faced by tobacco users, and tobacco users cost the state of Colorado $2 billion annually or approximately $855 per household. He also states that e-cigarette users are more likely to become cigarette smokers than those who have never used an e-cigarette. The executive order, focusing on underage vaping, alleges that almost 27 percent of Colorado high school students use e-cigarettes, the highest rate of any state. The order cites marketing and affordability as reasons for this trend in Colorado.

Hickenlooper’s solution to this public health concern is to decrease access to vape products by taxing them in the same way as cigarettes or other tobacco products. “Price increases are a proven tool for protecting youth use,” says the order, “but Colorado currently ranks 39th among states in cigarette taxes and does not extend any excise taxes to vaping products.”

A vaping tax is only one step in the governor’s proposal for reducing e-cigarette use by minors in Colorado. The other five steps in his Colorado Tobacco Prevention Blueprint are as follows:

  • require licenses for retailers of vape products;
  • require age verification for online sales;
  • prohibit e-cigarettes in the public places where cigarettes are currently prohibited;
  • raise the minimum age to 21 years to buy tobacco and electronic cigarettes; and
  • prohibit flavored tobacco and vaping products.

The executive order does not specify how this proposed e-cigarette tax should be imposed. There are a few options for Colorado lawmakers to consider. Roughly a fifth of states currently impose some kind of tax on electronic cigarettes. Some taxes are imposed as a special excise or sales tax for vape products or nicotine cartridges, while others match the state’s tobacco products rate.

Although e-cigarettes are deemed tobacco products by the FDA, there is currently no federal excise tax on vape products.

Will some or all of Hickenlooper’s policy proposals be adopted and become Colorado law? Or will vape advocacy groups be able to persuade state lawmakers that the claims about youth vaping are overblown? Only time will tell.

Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: Should the Colorado General Assembly follow Gov. Hickenlooper’s recommendations for a tax on electronic cigarettes? Why or why not?

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