By Paul Blair
For the last three years, state lawmakers have been on the receiving end of nearly all of the lobbying efforts aimed at raising taxes on electronic cigarettes and vapor products. The efforts have largely failed and as a result, proponents of tax hikes have shifted their attention to the ballot box. In least two states this November, voters may be asked to decide whether vapor products should be taxed like tobacco. This represents a new and significant threat to the industry and its consumers.
It should first be noted that the quest by proponents of big government to subject vapor products to statewide excise taxes has failed in every state where it has been tried, with one exception. When Minnesota changed its tax code to lump the products into the category of taxable “other tobacco products,” the industry was smaller with far fewer consumers and far less engagement by organizations like industry trade associations and consumer groups. Raising taxes on products that few consumers use isn’t as hard as doing so on products that millions use. That is the simple and short story of the Minnesota vapor tax.
The remaining three states that currently tax vapor products with a higher-than-sales tax are Louisiana, Kansas, and North Carolina. (Kansas recently passed a tax, but enforcement does not begin until 2017.) Understanding that the only reason excise taxes exist in these states is as a direct result of negotiation and advocacy efforts by companies who actually sell tobacco (and vapor) products is important. Regardless of its merit, the taxes in these states only exist because of tobacco and vapor company lobbying. It underscores the abject failure of the so-called public health community and demonizing these products in an effort to raise taxes on them.
Which brings us to their new tactic, circumventing state legislatures and putting the question before voters. Ballot initiatives are currently pending in California and North Dakota. If sufficient signatures are collected before each state’s deadline, voters will for the first time be faced with a question hundreds of legislators have faced in recent years – should tobacco-free technology products, vapor products, be taxed like tobacco? For public health and policy reasons, the answer is absolutely not. But the public affairs campaign necessary to convince voters otherwise may be more difficult and expensive than that.
The anti-smoking and public health community knows that their targeted misinformation campaigns have taken a toll on the public perception of vapor products. In California, taxpayers have even been footing the bill for the “Still Blowing Smoke” campaign, aimed at convincing people that vapor products are just as, if not more, dangerous than combustible cigarettes. Smokers and non-smokers alike are confused as hell about what exactly is in vapor products and whether they’re less harmful than cigarettes.
The fact that taxpayers,
through public university research grants and government public affairs campaigns, are paying to spread the myth of the oh-so-dangerous electronic cigarette, should offend the sensibilities of Democrats, Republicans, and Independents alike.
We know that vapor products are less harmful than combustible tobacco. But even if you disregard the 2015 Public Health England (PHE) study, which concluded the products are at least 95 percent less harmful than traditional cigs, take it from Mitch Zeller, director of the Food and Drug Administration’s (FDA) Center for Tobacco Products. Zeller remarked, nearly two years ago, “If we could get all of those people [who smoke] to completely switch all of their cigarettes to noncombustible cigarettes, it would be good for public health.”
Public health pawns, motivated by more than science have persisted in their campaigns, despite this reality.
If California’s ballot initiative passes, the state will have to devise an excise tax rate, which taxes vapor products at the same rate as cigarettes, a rate that will rise by $2 to $2.87 per pack. Americans for Tax Reform estimates that this could result in an excise tax of nearly 70% at the wholesale level. Anyone based in Arizona, Texas, or nearly anywhere else in the U.S. would be able to sell their products for 70% less to consumers, distributors, and retailers. For any company that produces e-liquid in California, this would mean lights out and good night.
The effort to raise taxes on tobacco and vapor products in California is being pushed by an activist billionaire by the name of Tom Steyer, generally content with steering his unlimited resources towards energy policy activism. It’s a sad state of affairs when a billionaire bully uses his personal wealth to target those who are far less fortunate than himself with higher taxes, especially on potentially life-saving products like vapor products.
The next state where a request has been submitted to put before voters a vapor tax is North Dakota. That initiative seeks to lump the products into the category of tobacco products like snus, and smokeless tobacco. The rate would rise to 58% at the wholesale level, constituting a 400% increase in taxes on vapor products. Similar to California, this effort recently failed in the state legislature.
Rob Port, the founder of sayanythingblog.com, a North Dakota political blog, hit it out of the park in his commentary on the effort:
“What worries me is that these anti-tobacco zealots, in their campaign to inhibit tobacco use (or even just things that look similar to tobacco use), actually are going to hold back progress toward healthier habits.”
Port is absolutely right. Ending cigarette use, which could never be accomplished through stiff taxes and onerous regulations, may be accomplished with an innovative technology product. The fact that the free market and not the government has potentially solved one of the greatest public health problems of all time (smoking) may present a significant conundrum for those who rely solely on government to pursue their policy goals. But, will voters see through the smoke? Only time will tell.
Paul Blair is state affairs manager at Americans for Tax Reform (ATR), a nonpartisan taxpayer advocacy organization founded in 1985 at the request of President Ronald Reagan. He can be reached at email@example.com on Twitter @gopaulblair.