The District of Columbia City Council recently held hearings on the proposed Vapor Product Amendment Act of 2015. The act calls for electronic cigarettes — or e-cigs — to be taxed at 70 percent of their wholesale price — the same rate as other tobacco products in the District. This misguided move by public officials to tax and regulate e-cigs will hurt small businesses and cost money in the long run.
The District isn’t alone in its quest to extract revenue from the activity known as “vaping.” Twenty-two states have introduced legislation seeking to tax e-cigs or the nicotine liquid used in e-cigs. Only two states, Minnesota and North Carolina, have laws in place taxing the sale of e-cigs.
Minnesota currently assesses an onerous tax rate of 95 percent of the wholesale price of e-cigs, but is trying to switch to a system that would instead tax the nicotine liquid at 30 cents per milliliter. E-cig retailers and manufacturers say the new method would amount to an 800 percent tax increase, crushing the vaping industry in Minnesota.
North Carolina, meanwhile, assesses a more modest five cent per milliliter tax on nicotine liquid. This goes to show that much like with other sin taxes, nobody has quite figured out the optimal rate or method of taxing vaping.
As politicians catch wind of this growing industry, it’s not just tax revenue they’ll seek out, but stringent regulations too.
Indiana, for instance, is seeking to tax e-cigs, license e-cig retailers, ban indoor vaping and require a $1,000 permit for anyone manufacturing nicotine liquid. The state is also considering requiring e-cig liquid manufacturers to install 24-hour surveillance cameras where the liquid is manufactured — a regulation not even cigarette manufacturers are required to adhere to.
The argument that e-cigs are a gateway to tobacco is flawed. A recent study found that out of more than 9,000 11-16 year-olds surveyed, less than 2 percent had ever vaped, and almost all that had vaped had already smoked tobacco before. This year’s National Youth Tobacco Survey shows that tobacco smoking continues to decline among American high school students, even though vaping has increased. It seems odd that lawmakers want to tax and regulate an activity that is weaning people off of tobacco, and to do so more stringently than tobacco itself in many cases.
There is scant scientific evidence on the long-term health effects of vaping. But studies have already proven that e-cig vapor contains significantly lower levels of toxins compared to cigarette smoke. The Food and Drug Administration is funding $275 million in research into e-cigs, but in the meantime they’ve said that vaping is less harmful than smoking tobacco.
Similarly, the American Heart Association has stated that e-cigs “present an opportunity for harm reduction if smokers use them as substitutes for cigarettes.” And there are countless stories of people who have gone from being heavy smokers to just vapers by using e-cigs.
According to data from Vaporin Inc., an e-cig distributor, 90 percent of smokers who turn to e-cigs do so with the intention of quitting smoking.
Would public officials consider taxing and heavily regulating nicotine patches or nicotine gum? Of course not; but then how are e-cigs any different than those products if they are getting people to stop smoking?
The District’s e-cig tax could increase the cost borne by taxpayers for the treatment of Medicaid recipients’ tobacco-related illnesses. These costs far outweigh any revenues that an e-cig tax may generate. The tax would also hurt local businesses, making vape shops in the city (of which there are several) no longer viable and putting current and future jobs at risk. If taxed at a high rate, vaping aficionados in the District could easily continue purchasing their e-cigs and vaping accessories in Maryland or Virginia — which will hurt the District’s bottom line.
Lawmakers need to make a better case for why e-cigs need to be taxed and regulated the same as, or more than, tobacco. From a public health and economic growth perspective, taxing and regulating the industry the same as tobacco is bad public policy. E-cigs should be treated as an alternative to tobacco, and they should be taxed and regulated differently as well.
Victor Nava is a staff writer at the Franklin Center for Government and Public Integrity. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.
