Since Colorado’s 64-cent cigarette-tax increase took effect in January, sales have declined so much that many cities and counties are experiencing double-digit drops in cigarette-tax revenue.
The new tax is large enough that the state still collected $70 million more from cigarettes during the first seven months of this year than last, according to state figures.
But cities and counties, which get only a slim cut of money from the new tax, have seen drops, typically in the tens of thousands of dollars, in the amount of money they receive from cigarette taxes.
The losses range from 7 percent in Lakewood to 40 percent in unincorporated Jefferson County. Of 23 metro- area cities and counties surveyed, only one, Arapahoe County, is experiencing an increase in cigarette-tax revenue this year over last.
The figures are the clearest indication yet that the 64-cent-a-pack tax increase that voters approved in November has had an impact.
But what kind of impact is it?
“We think it’s too early to tell,” said Bruce Atchison, the executive vice president of the Colorado Children’s Campaign, one of the groups that led the charge last year for the new tax. “But certainly if these trends continue, that’s probably a good sign that fewer people are smoking.”
In fact, there are numerous theories about why cities and counties have seen a drop in cigarette-tax revenue. For one, smoking in Colorado has been declining for the past several years, and some smokers may have been pushed to quit by the higher prices.
It could be that, as some have suggested, smokers started stockpiling cigarettes in late 2004 in anticipation of the higher prices in 2005. And the man who led the campaign against the new cigarette tax believes that more smokers are circumventing the tax by ordering online or through the mail.
For more than a decade, Colorado has had a 20-cent-a-pack tax on cigarettes. When voters approved the additional 64-cent-a-pack tax last year, the 20-cent tax stayed in place.
In the first seven months of 2005, the state collected about $23.7 million from that 20-cent tax, compared with $30.8 million for the same period last year, a 23 percent decrease. Revenue from the 20-cent tax has been falling for the past decade, but in earlier years, the decreases were in the 2 to 5 percent range, state Department of Revenue officials said.
Local governments receive 27 percent of the 20-cent tax. The state also will give about 3 percent of the 64-cent tax to cities and counties.
For metro-area cities and counties, the drop in revenue this year won’t require any significant budget cuts. Any loss of money hurts, many city officials said, but in Aurora, for instance, cigarette-tax revenue makes up only one half of 1 percent of the city’s revenue.
“I don’t think it’s been a significant enough reduction that it’s caused us any pain as far as having to cut any programs,” said Sabrina Henderson, a spokeswoman for the city of Golden. “I don’t think we rely significantly on this revenue coming in. Every penny helps, though.”
In Adams County, losses from cigarette-tax revenue will probably be matched by unexpected revenue gains in other areas, said Budget Manager Ben Dahlman.
Sam Mamet, the associate director of the Colorado Municipal League, said state officials foresaw such a decline in money going to cities and counties, which is why local governments were given a cut of the new tax.
But in cities such as Lakewood, which is in the midst of a budget crisis, the dip stings a little more.
“This revenue stream is close to half a million dollars,” said Lakewood spokeswoman Stacie Oulton. “That’s a sizeable revenue stream for us. To have a revenue stream that size drop, it does affect us. It does hurt, particularly since Lakewood has been in the position of cutting the budget for five years in a row.”
Others have felt burned by the new tax.
At Brian Maeng’s smoke shop in Aurora, Super Cigarettes, sales are down about 15 percent from a year ago. He said many customers have chosen to buy cheaper cigarettes. And Maeng, who said he makes about a 4 percent profit on a $3 pack or a $30 carton, is worried about his business’ future.
“More taxes kill the small businesses,” he said.
Across the street at Cigarette Mart, owner Huey Tran said he has also seen a decrease in sales.
“It’s lower than usual,” Tran said. “But most people have a habit to smoke. They just pay more. It has really hurt their budget.”
Wilson Croom, who helped lead a group opposing the tax last year, said some business won’t return. He suspects many people are going online or finding other ways to skirt the tax.
“It’s too easy for people to find sources to not have to pay that tax,” he said. “There’s no way to quantify that, but it has to be happening.”
However, such is the nature of this early speculating on the impact of the new cigarette tax that even smokers can’t agree on how it has affected them.
Standing outside Tran’s smoke shop, Golden resident Opal Gullickson called the new tax a “money cow.” Inside the store, Aurora resident Jodie Forney said, “It’s about as bad as gas prices. … I’m about ready to quit smoking because of it.”
But not Michael Deanda. Deanda said he had worried that the new tax would cost him more money, but then he found Tran’s shop, which he said sells cigarettes for less than he had been paying.
So, it would seem, when it comes to the state’s new cigarette tax, the impact is still a bit hazy.
“It will be interesting to see how the next several months come out,” Adams County’s Dahlman said.
Staff writer John Ingold can be reached at 720-929-0898 or jingold@denverpost.com.
