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Sin Taxes on E-Liquid: How States are Discouraging Quitting

Moves to tax vaping have been taking place across the country for some time now. The rationale behind this is often claimed to be discouraging the use of nicotine, particularly for youth – who are understandably more affected by such price increases. However, this explanation doesn’t really do much to hide what is likely to true motivation for such moves: to make money.

Sin taxes” raise a lot of revenue, and e-cigarettes – at present – are directly taking away from those earnings by drawing smokers away from combusted tobacco. Some have even gone so far as to blame anti-vaping campaigns on the loss of tax money due to declining tobacco sales. Viewed from this perspective, the rush to tax e-cigarettes and e-liquid seems to make some sense, but it also raises a challenging question: would taxes on e-cigarettes reduce the opposition to vaping we’ve been seeing since their creation?

The biggest question, however, is: how can sin taxes on vaping products be justified?

Why We Tax Cigarettes

The basic reason for taxing cigarettes is unavoidably obvious: cigarettes kill people. It’s been shown in many pieces of research that increasing the tax on cigarettes is an effective method of reducing smoking in society, particularly for young people and those with low incomes, and this is another core reason that “sin taxes” on cigarettes are popular.

There may be negative consequences for low-income smokers (because those who continue to smoke spend a much larger proportion of their income on their habit), but overall the move is one of the best approaches for bringing down the smoking rate from the playbook of tobacco control. The effect of federal taxes is slightly greater than that of state-level taxes, though – because when the tax rate varies between states, it’s pretty easy to avoid paying higher taxes in your home state by getting your cigarettes elsewhere.

Why Should We Tax Vaping?

The problem with applying this approach to vaping is clear from the get-go: with all the available evidence suggesting that e-cigarettes are much, much safer than cigarettes, can we really justify taxes on vaping for the same reason? Is discouraging vaping really a good idea?

According to an FAQ by the Tobacco Control Legal Consortium, e-cigarettes should be taxed because they contain nicotine, which they call “harmful to health.” According to the document, nicotine should be taxed because it poses poisoning risks, is harmful to maternal and fetal health during pregnancy and – following CDC rhetoric based on some unconvincing animal research – “may” have a long-term negative impact on the developing brains of teens.

Without going too deeply into this aspect of the issue, many things pose poisoning risks, pregnant mothers should avoid a lot of stuff that would hardly be considered harmful (such as hot dogs and Camembert) and the evidence for lasting impacts on teen brains (p 154) is limited (being classed as “suggestive” but not sufficient to infer genuine causation) as well as only tangentially relevant to taxes that would impact adult consumers.

The argument put forward in support of heavy taxes on vaping is that similarly high taxes on vaping products would reduce youth use and thereby prevent these negative consequences. However, such arguments betray an almost willful ignorance of the fact that almost all regular youth vapers are smokers (or ex-smokers who’ve quit by vaping), and that vaping among non smoking youths is very rare indeed. For youth who already smoke, the effect of nicotine exposure through vaping is obviously a minor concern in comparison to the abundant and unavoidable risks of smoking.

The justification for taxing e-cigarettes and e-liquid is then reduced to an arbitrary collection of claims not backed by the evidence, or at very least – like the poisoning claim – ones depending on willful ignorance of other, more severe, examples of products posing a greater risk. California senator Mark Leno justified a proposal to impose all of the regulations present on cigarettes onto e-cigarettes with the statement, “We’re going to see hundreds of thousands of family members and friends die from e-cigarettes use just like we did from traditional tobacco use.” It shouldn’t need clarifying that he has no justification whatsoever for such a statement.

The Unintended Consequences of E-Cigarette Taxes

So, perhaps the justification for taxing e-cigarettes like tobacco cigarettes doesn’t really stand up to scrutiny, but it only gets worse from there. Taxing e-cigarettes like tobacco cigarettes is almost destined to have negative consequences. One of the most widely-cited benefits of switching to e-cigarettes is saving money. Health concerns are obviously crucial, but for a current smoker, the reduction in nicotine-related expenditure is an understandable benefit of making the switch. Imposing taxes – particularly ones as high as the tax on cigarettes – all but removes this benefit. Many smokers who would have been tempted to start vaping because of the cost savings will probably just keep smoking.

Any rational e-cigarette policy should have encouraging smokers to make the switch as a core goal, but taxes on e-cigarettes serve as discouragement, if anything. In the absence of any evidence of serious risk from e-cigarettes, it really does start to look like the primary motivation is an excuse to generate more revenue.

How Are E-Cigarettes Being Taxed?

The lack of rationale and the likely unintended consequences haven’t stopped many such taxes being proposed, so it’s worth looking at some of the proposed taxes, and specifically, how they’re proposing to tax e-cigarettes. As a new product that’s considerably more complicated than cigarettes, so far there are numerous different approaches to applying the tax.

One of the most common is to tax e-liquid by the milliliter. This has the advantage of being relatively simple and focusing on the nicotine-containing component of e-cigarettes, but it also drives costs up quite significantly. One example is a proposal by Minnesota that originally suggested a tax of 30 cents per ml of e-liquid, meaning that the tax on a 30 ml bottle would have reached $9. A different tax ended up being imposed, but it clearly shows how large such taxes can get.

Things only get worse when the tax is imposed for smaller amounts of e-liquid. Among the most ludicrous proposals to date came from Ohio, where e-liquids were attempted to be taxed according to their “cigarette equivalent,” which was classed as per one tenth of a milliliter. At the same time, the tax on cigarettes was going to increase to 11.25 cents per cig, meaning that – if both went through – a 30 ml bottle of e-liquid would carry a tax of $33.75, the same amount of tax as 15 packs of cigarettes. Since vapers consume 4 to 5 ml per day, around a week’s worth of vaping would result in more tax than two weeks’ worth of smoking. This proposal – thankfully – seems to have vanished from the approved version of the bill.

Another approach is taxing the wholesale price of e-cigarettes, which is a more straightforward approach but can still lead to some significant increases in cost. For example, Minnesota’s tax ended up being 95 percent of the wholesale price for anything containing nicotine – in practice meaning that a starter kit would be taxed based on the whole cost unless the cartridges/e-liquid was sold separately. The same approach has been attempted in many other places, with proposals to date ranging from 24 percent of the wholesale price (as was proposed in Indiana) up to 80 percent of the wholesale price (as proposed in Rhode Island) or even more. Other approaches would use a similar strategy but base the tax on retail price rather than wholesale price.

Potentially the most absurd method is taxing per mg of nicotine. New Mexico tried this with SB 65, which proposed a huge tax of 4 cents per mg of nicotine, which would work out to almost $29 for a 30 ml bottle of 2.4 % nicotine e-liquid. This is an approach that would hit just-switching smokers the hardest, and is probably the most clear “sin tax” there could be – the more nicotine you have, the more tax you pay. Thankfully, this proposal also failed.

Are E-Cigarette Taxes Inevitable?

The question of whether we should tax vaping appears pretty straightforward: there is no real reason to, or at least not at a particularly high rate. Unless you support additional taxes on anything that could be called a drug on the basis of it being an indulgence, regardless of risk (which would also cover caffeine), it seems the only impacts of such moves would be to raise money for states and discourage smokers from quitting.

However, if you ascribe to the theory that lost tobacco tax revenue plays a part in the opposition to e-cigarettes, it appears that taxation could reduce the incentive to criticize and demonize the technology. Perhaps, as horrendously disproportionate as such a move would be, it could be that taxing e-cigarettes could do vaping a favor by reducing the motivation to oppose it.

This theory isn’t particularly promising, though; money isn’t the only reason people oppose tobacco harm reduction. Additionally, successfully fighting unjust taxes – as vapers have done in many cases – while still possibly giving some legislators a motivation to criticize the technology, would keep the cost as low as possible for the people who matter most: the smokers who are yet to make the switch.

The problem is that, with all of the taxes being proposed at present (at least 22 states have proposed them in 2015 alone) it does appear that taxes on e-liquids and devices are pretty much inevitable. It could be simply as a method for legislators to raise money at the expense of ordinary Americans, it could be to appease tobacco control campaigners or it could be out of a misunderstanding of the relative risks of e-cigarettes, but regardless of why, it appears that proposals to tax e-cigarettes are unavoidable. All vapers can do is fight them as much as possible.


Michael Grey
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Michael Grey

With a passion to educate through my writings and a passion to help others, I found my place here at Black Note. Being that I am a former smoker who quit smoking because of vaping, I knew I could help others do the same. Working for Black Note is a true blessing. Not only do I help educate vapers on a daily basis through my writings, but I am also enjoying the benefits of working with an amazing team and sharing an authentic tobacco solution with the vaping community.
Michael Grey
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