Hickenlooper vetoes bill to extend tax credit on some cigar sales

Author: Ernest Luning - April 28, 2017 - Updated: April 28, 2017

Gov. John Hickenlooper speaks at the Colorado National Guard's 157th birthday celebration on Monday, Jan. 23, 2017, at the Colorado Capitol. (Photo by Ernest Luning/The Colorado Statesman)
Gov. John Hickenlooper speaks at the Colorado National Guard’s 157th birthday celebration on Monday, Jan. 23, 2017, at the Colorado Capitol. (Photo by Ernest Luning/The Colorado Statesman)

Gov. John Hickenlooper uncapped his veto pen for the first time this session to reject a bill that would extend a tax credit on cigars sold to out-of-state consumers, saying the credit hasn’t generated enough economic activity to pay for even one job.

Senate Bill 139, would extend for three years a credit retailers have been able to claim since 2015 on the 40-percent excise tax paid on cigars and other non-cigarette tobacco products that are sold directly to customers outside Colorado. The Boulder-based Smoker Friendly company said it moved an online sales office from Nebraska to Colorado after the tax credit was established in 2015 and was supporting the extension.

But Hickenlooper said in his veto letter that, despite projections and the sponsors’ good intentions, the tax credit hasn’t resulted in much. “We are unpersuaded that this credit created any significant economic impact,” the governor wrote. Last year, he noted, tobacco distributors claimed just $11,200 in excise tax credits on $28,000 in direct out-of-state sales. “[T]he total of these are too low to even support a single worker in this industry,” Hickenlooper wrote.

What’s more, he maintained, the taxes on cigars and other tobacco products “have proven to be an effective public health tool.” Citing statistics that show middle- and high-schoolers smoke cigars — including “[c]heaper, candy-flavored cigars” — at almost the same rate the youth smoke cigarettes, Hickenlooper wrote that allowing retailers and distributors to enjoy the kind of savings the legislation establishes “harms Colorado’s ability to educate the public on risks associated with tobacco use.”

“We believe that tax uniformity and equity are core foundations for an efficient and fair tax code,” Hickenlooper concluded in his veto letter. “Excise taxes apply to alcohol, marijuana, tobacco and fuels. Other excise taxes have no such tax credit. As such, uniformity and equity are two important principles absent in this bill. Accordingly, I have vetoed Senate Bill 17-139.”

The bill’s prime sponsors are state Sens. Owen Hill, R-Colorado Springs, and Angela Williams, D-Denver, and state Reps. Dan Pabon, D-Denver, and Jon Becker, R-Sterling. A dozen other senators, including Senate President Kevin Grantham, R-Cañon City, signed on as co-sponsors to the legislation.

The bill passed by wide margins, potentially more than enough to over-ride the governor’s veto, which would require the votes of two-thirds of all members from both chambers. In the Senate the vote on third reading was 29-6, and in the House the tally was 56-8.

The Senate gave the bill its final push to the governor on April 5, when it approved amendments added by the House, and legislative leaders sent it to Hickenlooper for his signature on April 20.

Hickenlooper has so far signed 164 bills this session, according to legislative monitors Colorado Capitol Watch.

Ernest Luning

Ernest Luning

Ernest Luning is a political correspondent for Colorado Politics. He has covered politics and government for newspapers and online news sites in Colorado for more than 25 years, including at the Highlands Ranch Herald, the Jefferson Sentinels chain of community newspapers and the Aurora Sentinel, where he was the city hall and cops reporter. After editing the Aurora Daily Sun, he was a political reporter and blogger for The Colorado Independent site. For nearly a decade, he was a senior political reporter and occasional editor at The Colorado Statesman before the 119-year-old publication merged with Colorado Politics in 2017.