The Vape & e-Cigarette Tax Conundrum
Why Are Legislators Trying to Tax E-Cigarettes & e-Liquid?
For a very long time the US government has advertised the negative health effects that go hand in hand with tobacco use, and those effects were their justification to constantly raise tobacco taxes. Did you know that in the past decade both state and federal governments have collectively raised the tobacco tax over 120 times? Check out this list on every tax hike on cigarettes for the past 15 years.
Their reasoning being that smoking and tobacco use is detrimental to a person’s health and that if they continue to raise the excise tax on them it will eventually discourage the use, as each pack would take a good chunk out of their hard-earned income.
The public health advocates will always claim that the high taxes are for the interest of public health that somehow it will improve it, but in truth the taxes are really just used in the interest of government spending. Since 1998 these tobacco taxes have given the government over $500 billion to fund general budgets such as the emergency fund, and in some cases - other private budgetary projects. It's interesting to think that when public services are needed, a portion of the money contributed to support those things we enjoy in the developed civilization are powered off tobacco smokers money.
The mass market adoption and increase in sales of electronic cigarettes has caused a great decline in traditional cigarette sales. Politicians are now looking for money to replace the tobacco smokers former tax revenue. What seemed like a public health advantage of increasing the tobacco taxes as a justification, has reached a threshold at 80% tax.
Law makers now see electronic cigarettes and other vapor products as their new cash cow. In the past few years, 20 states have proposed legislation that could have raised taxes on e-cigs by up to 95% of the wholesale price. Such a tax only worked in two states so far.
North Carolina, where their residents now pay an additional 5 cents per milliliter on e-liquids that contains nicotine. For Minnesota, residents aren’t too happy with the 95% tax that they now pay on top of their wholesale costs for the vapor products that contain nicotine. So far other proposals have all but failed because unlike smokers, vapers unite, get politically active and fight together in order to quash the taxation and other illogical e-cig legislation.
So far in the 2015 legislative session, several other states have set proposals for the taxation of vapor products like Washington, California, New Jersey, Utah, Hawaii, Indiana and many more. The map of America below shows the states where proposals have been made, passed, or defeated.
How States Are Attempting to Tax Vape Products & e-liquid
In their efforts to milk the increasingly lucrative business from e-cigarette sales, many new bills have shown lawmakers attempting to lump electronic cigarettes in with their tobacco product counterparts. Labeling vapor products as tobacco even though they contain no tobacco whatsoever.
States that have bills pending to place e-cigs with tobacco include Arkansas, Maine, Michigan, New York, Oregon, Vermont, and Virginia—Wyoming and New Jersey have already passed a bill that names vaping products that contain nicotine as a “tobacco product” but exempt FDA approved cessasion products such as the patch or gum even with an industry wide deeming e-cigarette FDA regulation.
For a few states though the community has seen the folly in these bills and have continued to work together to stop such bills from passing. For the states in which the nicotine as a tobacco product has not worked, their only viable option is to tax the only isolated variable that electronic cigarettes have, which is nicotine itself. Obviously this type of bill has worked since a nicotine tax is the basis of North Carolina and Minnesota’s e-cigarette tax.
The Consequences Of e-Cigarette & e-Liquid Taxes
Placing a hefty tax on electronic cigarettes and other vape products will definitely have some cumbersome consequences to the average Joe. One of the worst being that it would deter smokers from even attempting to make the switch. They would no longer see the point in even trying a smoke-free product if it costs the same as their pack of cigarettes and many ex-smokers now who consider themselves vapers named the monetary savings as one of their top reasons to have tried e-cigarettes in the first place. These are your low to middle income customers who had found themselves spending over a quarter of their paycheck on their smoking habit.
These taxes will not only hit the average consumer hard, but even more so the small business owner. Labeling e-cigarettes as tobacco products would place more financial burden on their business as they would be required to pay licensing fees, and may cause them to have to hire lawyers and accountants to ensure their business’ compliance with the government’s requirements. These types of added expenditures can easily put a small e-cigarette brick and mortar store out of business, making tax-paying citizens lose their source of income.
The reduction of interest from smokers in trying e-cigs due to high cost should be enough to crush bills that intend to increase taxes. As if that wasn’t enough of a reason, having small businesses close their doors and many tax-paying citizens lose their source of income, should be an immediate red flag. But yet, in the absence of the FDA’s decisions on how to treat electronic cigarettes; many states are still continuing to generate bills that intend to over-regulate, ban and tax vapor products. It seems our lawmakers are more geared towards filling the budget hole from the increasingly lacking tobacco tax revenue more than they are concerned with the public’s health.