New England States Propose Taxes on Vapor Products
Driven by mounting concern over e-cigarette use by young people and the quest for additional revenue, five New England States have introduced legislation to tax vapor products.
Speaking before the Ways and Means Committee of the Vermont House of Representatives State Health Commissioner Dr. Mark Levine told members that taxes on e-cigarettes could reduce youth vaping. Tobacco control advocates and a chorus of legislators in the Green Mountain State agreed, apparently discounting a growing pile of evidence that vaping is far less harmful to health than smoking.
On January 29 the Ways and Means Committee unanimously approved House Bill 47 which would subject e-cigarettes to the same tax currently applied to other tobacco products, currently set at 92% of the wholesale price. The Committee forwarded the bill to the full House where it was passed by a majority vote of 134 to 6 and sent to the Senate. Governor Phil Scott has expressed his intention to sign the bill once it is approved by the State Legislature.
In the Connecticut General Assembly Rep. Mitch Bolinsky introduced Bill No. 5101 whose purpose is “to impose a tax on electronic nicotine delivery systems, liquid nicotine containers and vapor products in a manner similar to tobacco products”. The bill was referred to the Joint Committee on Finance, Revenue and Bonding.
Several other bills addressing minimum age of purchase, product labeling and use restrictions have also been submitted to the House of Representatives.
In New Hampshire Rep. Joelle Martin et al have introduced House Bill 680, which modifies the definition of tobacco products in the Tobacco Tax Law to include electronic cigarettes, derivatives of tobacco and products that contain nicotine that are intended to be heated or inhaled.
As a result, these products will become subject to the Tobacco Tax imposed on tobacco products other than cigarettes at a rate of 65.03 percent of the wholesale price. The bill is currently under review by the Committee on Commerce and Consumer Affairs. If approved, the Act will take effect on 1 July 2019.
The fiscal year 2020 budget proposed by Rhode Island Governor Gina Raimondo contains several new revenue measures. In addition to a 25 cent per pack increase in the cigarette tax, a new tax on electronic nicotine delivery systems (ENDS) would be introduced at a rate of 40% of the wholesale price.
Massachusetts Governor Charlie Baker has proposed extending the tobacco products tax to e-cigarettes. Due to a sharp decline in smoking among the state’s adults, cigarette tax revenue dropped by over $65 million from FY 2014 to FY 2018. The Governor hopes to recover some of the lost revenue through a 40% tax on the wholesale price of e-cigarettes.
Multiple bills have been submitted to the State Assembly, such as HD.3091 and HD.3416, which propose a tax of 75% of the wholesale price of electronic nicotine delivery systems.
Previous attempts to tax vaping
This is not the first time that legislators in these states have considered taxing vapor products. Bills submitted in prior sessions of several State Assemblies including those of Vermont, Connecticut and Massachusetts, failed to be enacted into Law. Currently, nine states and several county and metropolitan areas have created new taxes on e-cigarettes and vapor products. While some states including Delaware, Louisiana and North Carolina levy a modest tax of 5 cents per milliliter of liquid nicotine, others have placed e-cigarettes and e-liquid into the same category as other tobacco products which are subject to much higher tax rates based on the selling price to the retail trade.
In October 2015, the State of Pennsylvania adopted a budget containing a 40% tax on the wholesale price of vapor products. The negative economic impact on consumers and business were quickly felt. Of the 400 or so vape shops selling e-cigarettes and other vapor products operating in the State at the time, an estimated 100 were forced to cease operations as they could not pay the tax. Many consumers would not or could pay the higher prices brought about by the tax and put off or cancelled switching from smoking tobacco to vaping.
In addition to considering the economic impact of taxing e-cigarettes, legislators should be mindful that taxes interfere with smokers’ migration to less harmful vaping products.
Tags: e-cigarette taxation, ENDS
Categorised in: Electronic cigarettes, Excise tax, Tobacco harm reduction, USA
This post was written by Philip Gambaccini
Your claims that a $.05/ml tax on e-liquid is “modest” and that ad valorem (i.e. % of wholesale price) taxes on vapor products are “much higher tax rates” are dead wrong for open system vapers and those who sell 30, 60, 100 and 120 ml bottles of e-liquid, and your comments about PA’s 40% tax are the same talking points used by RJ Reynolds lobbyists who unsuccessfully lobbied PA legislative in 2016 to increase PA’s vapor tax by changing it from a 40% tax to a per ml tax on e-liquid.
Since its Vuse only contains 1ml of e-liquid, BAT/Reynolds has actively lobbied many different governors and state legislatures to impose per ml taxes on e-liquid (including NC, LA, KS, WV, DE, NJ).
While the wholesale price for a Vuse and a 100 ml bottle of e-liquid are both about $7, a 100ml bottle of e-liquid contains >100 times more e-liquid than a Vuse,
In PA, that same 100 ml bottle of e-liquid and the Vuse are currently taxed at $2.80 ($7 x .4 = $2.80).
But in DE, that same 100 ml bottle of e-liquid is taxed at $5, while the Vuse is taxed at <.$05.
In WV, that same 100 ml bottle of e-liquid is taxed at $7,50, while the Vuse is taxed at <.$075.
In NJ, that same 100 ml bottle of e-liquid is taxed at $10, while the Vuse is taxed at <.$10.
Imposing 100 times higher tax rates on open system vapers (than on users of JUUL, Vuse, Mark Ten, blu and Logic) is not a fair taxation scheme, but rather another strategy (in addition to the FDA Deeming Rule) that Big Tobacco companies have been deploying in the US (and likely other countries) to destroy vape shops in the US.
The letter I sent to PA legislators in 2016 urging them to reject BAT/Reynolds and VTA's attempt to change PA's 40% tax to a per ml tax on e-liquid (and more math) are at
Last year after the NJ gov proposed a 75% tax on vapor products in his budget (and after vaping and vapor advocates in NJ criticized the Govs proposal), I warned those same folks that BAT/Reynolds would lobby the NJ Assembly and Senate to change the 75% tax to a much more devastating (for open system vapers and vape shops in NJ) $.10/ml tax on e-liquid (because that's the same strategy Reynolds lobbyists had successfully deployed in LA, KS, WV and DE).
Although it was lobbyists from Altria and blu (not Reynolds) who did the lobbying, a month later the NJ Assembly and Senate Cmtes approved bills to impose a $.10/ml tax on e-liquid), Your previous article about the NJ tax fails to point out that NJ is the highest vapor tax in the US by far.
In NJ, someone who vapes 10ml of e-liquid per day is being taxed $1/day ($365/year) by NJ to vape.
Meanwhile, users of JUUL, Vuse, Mark Ten, blu and Logic are taxed at $.01 – $.02 per day by NJ.