House Committee on Finance (04/17/2009)

Final
STAFF SUMMARY OF MEETING

HOUSE COMMITTEE ON FINANCE

Date:	04/17/2009	ATTENDANCE

Time:	11:50 AM to 12:53 PM	Apuan	X
		Benefield	X
Place:	LSB A	Gerou	X
		Kefalas	E
This Meeting was called to order by		Kerr A.	X
	Representative Judd	Lambert	X
		Roberts	X
This Report was prepared by		Summers	X
	Ron Kirk	Swalm	X
		Frangas	X
		Judd	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
HB09-1342		Committee Vote - Final Action Failed

11:50 AM -- House Bill 09-1342 - Concerning the Cigarette Tax

Representative Benefield, prime sponsor, briefly explained the provisions of the bill. She noted that the bill eliminates the state sales and use tax exemption on the sale of cigarettes starting on July 1, 2009 and is estimated to generate about $31 million in sales tax revenue for FY 2009-10. Representative Benefield closed by saying that the bill maintains the exemption for counties, statutory municipalities, and special districts. After a brief committee discussion, testimony was heard.

The following persons testified:

11:53 AM -- Mr. Wilson Croom, Colorado Association of Distributors Inc., testified in opposition toward the bill. He stated that the bill is unconstitutional and needs a vote of the people. The increased cigarette tax imposed by the bill will mostly fall on lower income people and will add to the price of cigarettes. In turn, Mr. Croom said that the tax increase will result in more black market cigarette sales. Mr. Croon closed by discussing the SCHIP federal tax increase that recently went into effect on April 1, 2009. Cigarettes cost $44 per carton of which about $18 are made up of taxes. He urged the committee to oppose the bill.

11:59 AM -- Mr. Mark Larson, Colorado Wyoming Marketers Petroleum Association, and Colorado Licensed Beverage Association, testified in opposition toward the bill. This bill is a new tax that violates the TABOR amendment. Consumers will begin buying cheaper cigarettes and offset any revenue gain that may be estimated in the bill. In addition, Internet sales will also increase and add to the loss of state tax revenue. He closed by saying that the bill will be an additional expense to retailers in terms of the taxes that it collects.

12:06 PM -- Mr. Phillip Horowitz, Department of Revenue, responded to committee questions about home rule city tax collections and programming costs that may result from the bill.

12:10 PM -- Mr. Ed DeCecco, Office of Legislative Legal Services, responded to questions about the TABOR considerations given the bill. At the state level, we had an exemption in place for many years but had a sales tax on cigarettes. He noted that it is not certain that the courts would see the repeal of the exemption as a new tax. Mr. DeCecco discussed the question of whether the bill would result in a net revenue gain and need voter approval and spoke to the recent Supreme Court mill-levy decision. A net revenue gain would be realized if the state exceeds the TABOR limit. Mr. DeCecco closed by saying that since the state already obtained voter approval under Referendum C to keep revenue above the TABOR limit, any net revenue gain in FY 2009-10 that does not exceed the limit may not be viewed a net revenue gain.

12:18 PM

Recess.

12:29 PM -- Ms. Mary Szarmach, Smoker Friendly, testified in opposition toward the bill. She noted that the bill will add a sales tax that results in an additional $1.30 per carton. Ms. Szarmach distributed a handout on cigarette taxes (Attachment A) and spoke to the new SCHIP federal tax. These new taxes will result in job losses and more taxes imposed on low-income people. The average smoker in Colorado makes less than $40,000 per year and is paying enough in taxes. She closed by urging the committee to oppose the bill.

12:35 PM -- Mr. Jason Schrock, Legislative Council Staff, responded to questions about the fiscal note. He responded to whether the state would see a reduction in consumption due to the federal tax. Mr. Schrock closed by discussing the impact in the fiscal note.

12:38 PM -- Representative Kagan, joint prime sponsor, discussed House Bill 09-1342 and noted how it would help to balance the FY 2009-10 budget. He closed by urging the committee to support the bill.

12:41 PM

Representative Judd, Chairman, briefly discussed the bill with the sponsors and said that it was his intention to lay the bill over for final action on Tuesday, April 21, 2009. Representative Lambert made the following motion to refer House Bill 09-1342 to the Committee of the Whole. The motion failed on a 5-5 vote.


BILL:	HB09-1342
TIME:	12:46:16 PM
MOVED:	Lambert
MOTION:	Refer House Bill 09-1342 to the Committee of the Whole. The motion was made under rule 25 (j) (G) and failed on a 5-5 vote. The bill was laid over for action only on Tuesday, April 21, 2009.
SECONDED:	Swalm
		VOTE
	Apuan	No
	Benefield	No
	Gerou	Yes
	Kefalas	Excused
	Kerr A.	No
	Lambert	Yes
	Roberts	Yes
	Summers	Yes
	Swalm	Yes
	Frangas	No
	Judd	No

Not Final YES: 5 NO: 5 EXC: 1 ABS: 0 FINAL ACTION: TIE

12:53 PM

Adjourn.