Lewis: Sins of the state

There was a time when “sin taxes” were at least honest about their purpose. Tax booze, tax cigarettes — not because the government loved them, but because it wanted less of them. These were the fiscal equivalent of a disapproving glare from your grandmother: “Fine, if you must misbehave, at least pay for the privilege.”

But here in Colorado? The state isn’t scolding anymore — it’s passing out the dice and rolling joints right alongside you.

That’s because sin taxes in Colorado — on marijuana, gambling, and now sports betting from the comfort of your own couch — have quietly morphed from behavior deterrents into behavior dependents. Why? Simple. The Taxpayer’s Bill of Rights (TABOR) limits how much Colorado can collect in regular taxes without refunding the excess. But sin taxes? Those are exempt. Every marijuana gummy or last-second parlay you lose on the Broncos funds a government that increasingly counts on you making bad decisions.

And the numbers are staggering.

Marijuana: The green rush

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Since legalizing recreational marijuana in 2014, Colorado has raked in over $2.3 billion in cannabis tax revenue. At its peak in the 2020-21 fiscal year, the state collected $424 million from cannabis taxes. These funds were heralded as a windfall for public services, with significant portions earmarked for education and health programs. However, as marijuana tax revenues have declined in recent years —dropping to $248 million in the 2023-24 fiscal year — the state’s reliance on these funds has become apparent.

Sports betting: A safe bet for state coffers

In 2019, Colorado voters approved Proposition DD, legalizing sports betting with the allure of funding the state’s water conservation projects. The state imposes a 10% tax on sports betting proceeds, and as of 2023, it had collected approximately $27.4 million in sports betting tax revenue, with the majority allocated to water initiatives. While this revenue stream supports important projects, it also ties state funding to gambling activities, which carry their own social risks.

One study showed that those living within 10 miles of a casino had double the risk of developing a gambling problem. So, what happens when we now allow the casino 2 feet away on our phone?

The TABOR workaround

Here’s where it gets interesting. TABOR is designed to keep the government’s hands out of taxpayers’ pockets by capping the amount of revenue the state can retain without voter approval. But sin taxes? They’re the loophole. By funneling funds through taxes on marijuana and gambling — revenue streams not subject to TABOR’s constraints — the state effectively increases its budget without those pesky taxpayer refunds. It’s a fiscal sleight of hand that Houdini would applaud.

The ethical quandary

This cozy relationship between vice and revenue raises some thorny questions. When the state’s coffers swell with proceeds from activities like gambling and marijuana consumption, there’s a perverse incentive to keep those activities thriving. After all, more sin equals more tax revenue. This dependency could make policymakers hesitant to enact regulations that might curb usage, even if such measures would benefit public health.

The taxpayer’s illusion

Many Coloradans might assume that these sin taxes are offsetting other tax burdens or enhancing public services. In reality, while these funds contribute to specific programs, they don’t necessarily translate to broader tax relief. Instead, they serve as additional revenue streams that expand the state’s budgetary pie, often without direct accountability or transparency.

A call for transparency and balance

While funding public services through sin taxes isn’t inherently nefarious, it becomes problematic when it allows the state to bypass fiscal safeguards like TABOR. Taxpayers deserve transparency about how much revenue is being generated from these sources and how it’s being utilized. Moreover, there should be a balanced approach that doesn’t make the state financially dependent on activities that can have negative social consequences.

In the end, Coloradans might want to ask themselves: When the house always wins, and the house is the state, who’s really benefiting from this game?

Mark Lewis, a Colorado native, had a long career in technology, including serving as the CEO of several tech companies. He’s now retired and writes thriller novels. Mark and his wife, Lisa, and their two Australian Shepherds — Kismet and Cowboy, reside in Edwards.