NCPA - National Center for Policy Analysis

Taxes on E-Cigarettes Would Perpetuate Smoking

April 7, 2014

Washington and New Jersey are considering e-cigarette taxes that would only encourage cigarette smoking, says Leonard Gilroy, director of government reform at the Reason Foundation.

E-cigarettes are an alternative to harmful, traditional cigarettes, yet lawmakers in both Washington and New Jersey have unveiled budget proposals that would impose high taxes on them. E-cigarettes are already taxed in both states, as are the liquids within the cigarettes and associated batteries, yet the legislatures are looking at heaping additional taxes on the products in order to raise revenue.

Ultimately, these taxes are counterproductive to improving public health, unjust in application and economically harmful to a developing market.

  • A literature review in the Journal of Public Health Policy assessed 16 scientific studies on e-cigarettes, concluding that they were much safer than traditional tobacco cigarettes and were comparable to nicotine replacement products. Some evidence even indicates that they are more effective than nicotine patches. By making e-cigarettes more expensive, the taxes would discourage smokers from switching from tobacco cigarettes and undermine any economic incentive for smokers to quit.
  • As it stands, e-cigarettes are far less expensive than cigarettes, which are taxed heavily. Washington's tax proposal would double or even triple the cost of e-cigarette liquids, raising the price to the same level as traditional cigarettes. Yet, other nicotine products (those deemed "smoking cessation products" by the Food and Drug Administration) would not be taxed. The Washington tax, therefore, targets one group of non-tobacco nicotine users, solely based on the nicotine delivery agent.
  • A projection by Wells Fargo estimates e-cigarette sales to increase at an average of 38.1 percent annually, increasing sales from $1.5 billion today to more than $45 billion in 10 years. Sales are not the only economic activity that would be impacted by these taxes. Vapor stores have developed in many states, which generate large amounts of revenue (not simply for the stores themselves, but for the government in the form of taxes). These businesses could be destroyed by the new taxes.

If reducing tobacco usage and improving public health is the goal, these taxes run completely counter to that aim. By passing these tax proposals, it is far more likely that Washington and New Jersey smokers will never switch from traditional, tobacco cigarettes.

Source: Leonard Gilroy, "Washington State and New Jersey Legislatures Consider Massive Taxes on E-Cigarettes That Would Perpetuate Smoking," Reason Foundation, March 11, 2014.


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