Summary
The Colorado Legislature placed Colorado Proposition KK on the ballot for voters to decide. If approved, it places a 6.5 % excise tax on gun manufacturers, gun dealers, and ammunition vendors that make over $2,000 monthly on the net taxable retail sales of guns, gun precursor parts, and ammunition. The first $30 million of revenue per fiscal year from the tax would go to the Colorado Crime Victims Services Fund, the next $5 million to the Behavioral and Mental Health Cash Fund for veterans’ mental health services, the next $3 million to the same fund for behavioral crisis response services for children and youth, and the last $1 million to the School Disbursement Cash Fund. Revenues beyond that would be spent as the legislature chooses.
This excise tax is in addition to an existing 2.9% state sales tax and 11% federal excise taxes on guns. Exceptions were made for sales to law enforcement and active-duty members of the armed forces. In addition, gun manufacturers, dealers, and ammunition vendors would be required to register with the Department of Revenue. If approved, Colorado would become the second state in the nation to have an excise tax on guns and ammunition after California levied an 11% tax intended to fund violence intervention and education.
Fiscal Impact
The state estimated that this excise tax would bring in $35.6 million in revenue in 2025-2026 and $36.9 million in 2026-2027. This estimate assumes that the legal purchase of guns will not change in response to the additional taxes. The administrative cost, to be paid for with tax proceeds, is $390,000 to administer the tax in 2024-2025.
Proponents’ Arguments
Organizational supporters of a “yes” vote argue that victims’ programs need funding and that this is a fair way to provide it. Colorado Coalition Against Sexual Assault and its member programs stated that without the funding made available through the excise tax, victims of sexual assault and other crimes will see a decrease in resources. Democratic Majority Leader Monica Duran (Jefferson) and Democratic Representative Meg Froelich (Arapahoe) sponsored the legislation, and Duran cited her own usage of victim support services as a single mom as essential to her escaping domestic violence. Supporters argue that the steady funding stream that would come from this excise tax is necessary to ensure the adequate provision of services, such as crime victims’ services and access to mental health services for veterans and children, that they say remediates the harmful collateral consequences of guns and gun-related products, including suicide and intimate partner killings. They argue the excise tax is consistent with both the longstanding federal tax on retail firearms sales, which is used to fund wildlife conservation, and is consistent with historical examples from the 19th and early 20th century of state taxes on firearms serving as a regulation on sales and purchases.
Opponents’ Arguments
Organizations that have encouraged a “no” on the ballot measure argue it is a limitation on gun rights and a tax that hits lower-income individuals hardest. The National Rifle Association has called it an attack on Second Amendment rights and those who assert those rights. The Congressional Sportsmen’s Foundation also sees the bill as a restriction of the Second Amendment. They argue that the tax is a form of a “sin tax” (such as that levied on alcohol and tobacco) via higher prices passed on by dealers and manufacturers to consumers, meant to deter law-abiding sportspeople from purchasing guns and ammunition necessary to their pursuits, and meant to reduce legal gun ownership across Colorado. Without the purchase of guns by sportspeople, The Sportsmen’s Foundation further warns that conservation funding, dependent on federal excise taxes on guns, would be lowered. The Independence Institute’s argument points out the tax will hit the poor the hardest: “The legislature is making clear that Black and Brown people, since they are statistically poorer, shouldn’t own firearms, or at least should face a substantially higher hurdle to exercise this right.” Senator Kevin Van Winkle (R-Highlands Ranch) likened the excise tax to a poll tax due to its being levied on a commodity whose possession is protected by the Constitution.
Discussion
The purpose of the excise tax in Prop. KK is framed by its sponsors as providing stable funding for programs that seek to help victims of crime, those who have experienced violence-related trauma, and those in need of mental health services. The state is feeling pressure for such funding due to a massive drop in federal funding for these purposes through the Victims of Crime Act (VOCA) from the Crime Victims Fund, which is replenished from fines tied to federal crimes, penalties, and forfeitures. Because VOCA is the primary source of funding for victims’ services in all 50 states, the projected $700 million decrease in 2024 has sparked widespread concern, with Colorado expecting a 45% cut. A large coalition—including state attorneys general, politicians, and service providers across the country—has been calling for various solutions to plug the budget holes and ensure stable funding.
Crime victim and mental health services are important, but is an excise tax on a targeted industry the right way to fund them?
The United States Supreme Court stated in Sonzinsky v. U.S. (1937), a decision upholding Congress’ constitutional power to tax firearms dealers, that “a tax may have regulatory effects and may burden, restrict, or suppress the thing being taxed.” The federal government has had an 11% excise tax on the production and importation of guns to support conservation, wildlife preservation, and hunter-education programs. However, the fact that taxing firearms has passed constitutional muster doesn’t make it a good policy decision. Excise taxes violate several principles of sound tax policy.
First, it is not neutral. Taxes shouldn’t distort markets, impinge on individual choice, and punish businesses and individuals monetarily by creating categories of “sinful” legal products for the purpose of reducing their usage. Such taxes are inherently regressive, hitting the poor much harder than the middle class or wealthy. This is particularly problematic for guns, the only commodity whose use is enshrined in the Constitution as a right, and the individual ownership of which was upheld in the Supreme Court decision District of Columbia v. Heller.
The measure further violates sound tax policy by being an inherently unstable source of funds for services it claims desperately need funding. This is because it depends on the assumption of unchanging consumer behavior when, in fact, sin taxes do tend to reduce the use of the taxed product, and thus, the revenue from them declines over time. Hence, sin taxes are a terrible way to fund important programs. Although proponents of the bill did not state that the tax is intended to reduce gun sales, recent analysis of the U.S. firearms market suggests that it would have that effect. One study concluded that for every 1% increase in the price of guns, demand falls by 2.5%, and so a 6.5% increase in costs to manufacturers and dealers, when passed along to consumers, could have a sizable effect on sales.
If Coloradans agree that crime victims’ services, access to mental health and behavioral services, and school safety are important, these should not be dependent on fluctuating excise taxes. They should especially not be dependent on excise taxes that rely on the continued robust market in weapons asserted to cause the damage requiring interventions to begin with. These programs for victims and those in need of mental health should be supported through general funds, both at the federal and state levels.
There are also problems with targeting the gun industry with this tax. The measure states that the tax is imposed “in order to generate sustained revenue for programs designed to remediate the devastating impact of these products on families and communities across the state.” This statement has two glaring problems. One is that it is unclear what percentage of the services provided directly relate to the impact of gun violence. Victims’ services are provided to all victims, regardless of the use of a gun in the commission of the crime. Behavioral and mental health counseling to those who have experienced combat trauma also does not relate to domestically purchased guns. The bill mentions the mental health crisis for children following COVID-19. COVID-19 was a virus, not a gun, and an abundance of other factors, like loneliness, created the conditions under which suicidal ideation increased.
Another concern is that the bill makes legal guns and ammo the “sin” to be taxed, sidestepping the fact that the vast majority of legal gun and ammo buyers will pay the tax and never use or allow those products to hurt anyone. It’s a sin tax that overwhelmingly punishes the innocent for a sin they don’t commit.
These taxes are the wrong approach to funding social services deemed essential, will unfairly affect the poor more than others, will not provide stable funding for victim services, and will impinge on law-abiding citizens exercising their rights to buy guns and ammunition.