The High Costs of Vaping Taxes

The High Costs of Vaping Taxes
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For the 24 million American smokers who are desperately trying to kick their deadly habit, new and innovative products such as e-cigarettes and heat-not-burn products offer compelling alternatives that feel like smoking, with a tiny fraction of the risk. Yet, the federal government and state governments across the country are looking to tax these products out of existence based on half-baked theories and a slew of misinformation. A recent study by Tax Foundation analyst Ulrik Boesen that examined tax policy surrounding tobacco and reduced-risk alternatives found that a heavy-handed tax regime undermines public health and encourages dangerous black markets. Lawmakers across the country must pay heed to these and other findings, and allow smokers to make informed, low-cost choices that could literally save their lives.

In his insightful analysis, Boesen states what should be obvious to elected officials: “One way of getting the 24 million Americans who want to quit away from cigarettes is to offer less harmful nicotine alternatives as cessation tools.” But judging by the latest slew of federal and state legislation, policymakers have not gotten the memo. For example, legislation introduced by Reps. Tom Suozzi (D-N.Y.) and Peter King (R-N.Y.) would impose a tax on e-cigarette purchases of $50.33 per 1,810 milligrams of nicotine. Assuming that vape pods weigh about 40 milligrams each, this onerous proposal would tack $1.11 onto the price of each and every cartridge of vaping liquid. 

Too, Washington, D.C. levies an astounding 96 percent tax on convenience stores and vape shops buying harm-reduction products from manufacturers. Vermont and Minnesota are not far behind D.C., with wholesale tax rates of 92 percent and 95 percent, respectively. Unsurprisingly, these taxes get passed along to consumers and make it difficult for sellers of harm reduction products to remain in business. Citing a report from The Philadelphia Inquirer, Boesen notes, “The high Pennsylvania tax (40 percent of wholesale value) had a considerable impact on the market, and roughly 100 vapor stores had closed within one year of the application of the tax.” These excise taxes may (briefly) raise revenue, but as Boesen’s analysis makes clear, the long-run costs in human lives and dollars far exceed any benefits.

The science is abundantly clear that e-cigarettes are significantly safer than conventional, combustible cigarettes, and smokers across the country report using these products as an off-ramp from cigarettes. In 2015, Public Health England (a part of the U.K. government) first found that vaping products are at least 95 percent safer than cigarettes and have repeatedly reaffirmed and strengthened this finding in subsequent studies. And according to a 2019 study published in The New England Journal of Medicine, e-cigarettes are almost twice as effective as traditional nicotine replacement therapy (i.e. nicotine patches and gum) in weaning smokers off of cigarettes.

The study’s authors note, “The rate of sustained 1-year abstinence (from cigarettes) was 18.0% in the e-cigarette group and 9.9% in the nicotine-replacement group.” These findings suggest that, over the long-term, high e-cigarette excise taxes can result in fewer people quitting smoking and more deaths from preventable illnesses such as lung cancer. Boesen finds that “vapor products could be a key tool in the fight against tobacco-related morbidity and mortality…excise taxes on harm-reducing vapor products at high rates risk harming public health by pushing vapers back to smoking.”

And, rampant taxation tends to push product sales into poorly-regulated black markets. Illegally pedaled vaping products containing contaminants such as Vitamin E acetate have been linked to 60 confirmed deaths and nearly 3,000 hospitalizations as a part of the “EVALI” (e-cigarette, or vaping, product use-associated lung injury) outbreak. The Centers for Disease Control and Prevention notes that most of these dangerous products come from “informal sources like friends, family, or in-person or online dealers,” typical channels that e-cigarette users turn to once products are heavily taxed and restricted.

To prevent these and other health consequences, policymakers across the country must tax harm reduction products lightly and carefully. There are 24 million Americans who want to kick conventional cigarette smoking to the curb, and elected leaders shouldn’t banish life-saving products through excessive taxation.

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