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Gov. Jared Polis\u2019 office was asked to meet several conditions insisted upon by Altria in exchange for the cigarette giant agreeing not to fight legislation that put a question on the November ballot asking voters to raise tobacco and nicotine taxes in Colorado, emails obtained by The Colorado Sun show.<\/p>\n
One of those conditions included adding a minimum-price clause to the measure that requires a pack of cigarettes to be sold for no less than $7 starting this year. The emails show Polis\u2019 office was warned <\/a>the provision could help Altria, which owns the Marlboro brand and is heavily invested in the vaping company JUUL Labs, dominate the cigarette market in Colorado by boxing out discount competitors.<\/p>\n \u201cIt\u2019s like forcing our Honda to sell for the same amount as Mercedes,\u201d Craig Hughes, a high-powered Democratic political consultant, wrote about the minimum-price clause in a June 3 email to Cary Kennedy, a senior adviser to Polis. \u201cIt\u2019s a lower-quality product, priced as such, which is how it gets its market share. If we forced Honda to increase their price to (the) same as Mercedes, no one would buy it. \u2026 Are we literally writing into state statute something that creates a Colorado monopoly for higher-end Altria products?\u201d<\/p>\n Also on June 3, Hughes sent an email to David Oppenheim, Polis\u2019 legislative chief, saying Altria was requiring the minimum-price clause to be included in the policy.<\/p>\n \u201cThey insisted on \u2018price floors\u2019 for a pack of cigarettes,\u201d wrote Hughes, who was working for groups pushing for the new taxes. \u201cSeems to be a distinct competitive advantage for Altria.\u201d<\/p>\n The legislation, House Bill 1427, passed with the minimum-price clause<\/a> in the final days of Colorado\u2019s 2020 legislative session. Voters then overwhelmingly approved the ballot question, Proposition EE, in the November election.<\/p>\n The emails obtained by The Sun were included in lawsuits filed in Denver District Court and federal court against Polis that seek to invalidate the minimum-price clause in Proposition EE.<\/p>\n Both legal actions are backed by the discount cigarette company Liggett Vector Brands Inc., which gave millions of dollars to the unsuccessful campaign to prevent Proposition EE from passing. The state lawsuit was filed by a Colorado smoker who is being represented by Liggett\u2019s attorneys; the company is listed as the main plaintiff in the federal case.<\/p>\n The lawsuits remain pending, though a federal judge last week rejected Liggett Vector\u2019s request for a preliminary injunction that would have temporarily invalidated the minimum-price provision.<\/p>\n Liggett Vector\u2019s lawyers are arguing in state court that Proposition EE violates Colorado\u2019s single-subject rule in the state constitution, which requires legislation to address only one topic at a time. In federal court, the company is arguing that the ballot initiative violates interstate commerce laws.<\/p>\n The emails obtained by The Sun shed light for the first time on why House Bill 1427 was written the way it was. The Democratic state lawmakers who championed the measure have refused to answer questions about the legislation and, specifically, the minimum-price clause, citing the ongoing lawsuits.<\/p>\n The correspondence also makes it clear that the governor\u2019s office was very involved in the measure. Kennedy, the governor\u2019s senior adviser for fiscal policy, and one of her staffers provided analysis of the bill, including the price-floor provision, for Oppenheim and Polis\u2019 chief of staff, Lisa Kaufmann.<\/p>\n Polis, a Democrat, supported Proposition EE. The millions of dollars in new, annual tax revenue it will generate will help expand preschool education in Colorado, one of the governor\u2019s key policy promises. The initiative also was backed by health advocates who have for years cited studies showing increasing taxes can decrease the use of tobacco and nicotine products, especially among teens.<\/p>\n In response to questions from The Colorado Sun, including about whether Proposition EE created an unfair advantage for Altria and whether Polis feels the ballot initiative would have passed had the company fought it, the governor\u2019s office provided a written statement.<\/p>\n \u201cProposition EE is a win-win for the state of Colorado,\u201d said Maria De Cambra, Polis\u2019 director of communications. \u201cWe are able to fund free universal preschool for every child while protecting children and other vulnerable populations from cheap, harmful and addictive nicotine products. The governor is extremely proud to have delivered on his promise to provide this long overdue support for Colorado families.\u201d<\/p>\n Polis and the health groups failed to pass a similar tobacco and nicotine tax increase bill in 2019 in large part because big tobacco interests successfully lobbied against the measure.<\/p>\n The emails obtained by The Sun about the 2020 legislation, including one labeled as a \u201cdraft term sheet\u201d and marked \u201chighly confidential,\u201d show Altria was negotiating the measure with Polis and health groups. One condition on the term sheet was for Polis not to pursue any more tobacco tax increases for the rest of his gubernatorial term if House Bill 1427 passed.<\/p>\n In exchange, Altria agreed not to fight House Bill 1427 in the legislature. The company also vowed not to spend any money fighting Proposition EE, according to the draft term sheet.<\/p>\n Altria did not respond to a request for comment last week, but the company had a neutral stance toward House Bill 1427 and did not spend money for or against Proposition EE. It\u2019s not clear if there were changes made to the draft term sheet before it was finalized.<\/p>\n \u201cThe governor\u2019s staff were kept aware of the negotiation and policy parameters,\u201d De Cambra wrote to The Sun. \u201cOur interest was to ensure the final legislation met the twin goals of reducing teen smoking and vaping and providing revenue to support universal preschool in Colorado. There were various proposals that were laid out and the administration did not agree to any proposal that would bind the governor for the remainder of his term.\u201d<\/p>\n In 2016, Altria spent more than $16 million to block a tobacco tax increase that was on the ballot in Colorado. Hughes acknowledged Altria\u2019s deep pockets in an email to Oppenheim, calling them the \u201cbiggest spender\u201d against tobacco and nicotine tax increases in Colorado.<\/p>\n Advocates of Proposition EE have said the minimum-price provision is good public health policy because studies have shown that, as tobacco and nicotine prices rise, use goes down.<\/p>\n \u201cWhether or not any other stakeholder might benefit, I don\u2019t know and, honestly, I don\u2019t care. We only care about saving lives, and that\u2019s what this would do,\u201d Jake Williams, who leads Healthier Colorado, an organization that spearheaded the ballot initiative, told The Sun in August.<\/p>\n But Liggett Vector Brands Inc. contends that the provision is illegal.<\/p>\n The early June emails between Hughes and Oppenheim also indicate that the legislature\u2019s attorneys, as well as lawyers from the Colorado Attorney General\u2019s Office, warned that coupling the minimum-price clause with the tax hike portions of House Bill 1427 may violate the single-subject rule.<\/p>\n \u201cThat will have to move separately,\u201d Hughes wrote. \u201cAnd, I\u2019ll be honest here, not sure how it survives. The good news is if it does pass, it is not part of our ballot (measure) so we don\u2019t need to defend it to the voters. But if Altria can\u2019t get that the deal might be in jeopardy, so it\u2019s complicated.\u201d<\/p>\n The minimum-price clause was included with the rest of House Bill 1427 despite the concerns.<\/p>\n The marquee part of House Bill 1427 and Proposition EE raised taxes on a pack of cigarettes to $1.94 starting this year from 84 cents. In July 2024, the taxes will rise to $2.24 a pack and then to $2.64 a pack in July 2027.<\/p>\n Nicotine products, including vaping devices and fuel, have not previously been taxed in Colorado. But now, under Proposition EE, they are taxed at 30% of their manufacturer\u2019s list price. By July 2024, that would rise to 56% of the list price and to 62% in July 2027.<\/p>\n While Proposition EE raises taxes on most tobacco and nicotine products in Colorado, it actually slashes them for so-called modified-risk tobacco products.<\/p>\n Modified-risk tobacco products \u2014 or MRTPs \u2014 are determined by the Food and Drug Administration to have lower risks of certain health effects compared to smoking cigarettes. Only a limited number of products have achieved that designation, but a number of them are marketed by Altria.<\/p>\n Altria sees those products, which are part its IQOS system, as its future. The system is a kind-of cross between a traditional cigarette and a vape device.<\/p>\n Vaping shops objected to the MRTP discount, saying they lack the resources to seek an MRTP designation for their merchandise from federal regulators and that Altria would be given another market advantage.<\/p>\n The emails reviewed by The Sun show that Hughes and the governor\u2019s office were aware of the objections to the MRTP provision and understood how it could benefit Altira.<\/p>\n \u201cPretty interesting comments from the vape side about MRTP favoring large \u2026 companies (Altria),\u201d Hughes wrote in an email chain that included Oppenheim, the governor\u2019s legislative chief, and Kennedy, the senior adviser to Polis. \u201cNot surprised, frankly.\u201d<\/p>\n The minimum-price provision dictates that after the price of a pack of cigarettes is raised to no less than $7 this year, it will go up to no less than $7.50 in 2024.<\/p>\n Read more at The Colorado Sun<\/a><\/em><\/p>\n