June 17, 2018

Electronic cigarettes are growing in popularity, and as a result, state and local governments are considering whether and how the products should be regulated and taxed. Legislators in New Jersey are currently examining a new proposal from Gov. Phil Murphy in the New Jersey State Budget that would create a substantial tax on vaping products. Two current versions of the tax are under consideration: the first bill, being considered in the Assembly, would create a 10-cents-per-milliliter tax on vaping products, and the second, being considered in the Senate would double the tax and create a 20-cents-per-milliliter levy.

Discouraging smoking is a laudable goal, so why are some New Jersey lawmakers attempting to tax a less-harmful alternative? E-cigarette taxes have many negative effects, including driving residents to buy untaxed or lower-taxed products elsewhere, reducing revenues for retailers in the state, and unduly burdening low- and moderate-income families.

Opponents of taxes on e-cigarettes and vaping devices, also called tobacco harm reduction (THR) products, argue they are counterproductive and offset some of the public health gains these products provide. These claims are supported by the available research, which shows e-cigarettes and vaping products are significantly less harmful than tobacco cigarettes.

Electronic cigarettes have proven to be effective products for tobacco harm reduction. In a Heartland Institute booklet titled “Vaping, E-Cigarettes, and Public Policy Toward Alternatives to Smoking,” Dr. Brad Rodu, senior fellow for Heartland, argued, “It is the smoke produced by burning tobacco, not the ingestion of nicotine, that ought to be the target of public health campaigns.”

In 2018, the National Academies of Sciences, Engineering, and Medicine concluded switching from combustible cigarettes to e-cigarettes “results in reduced short-term adverse health outcomes in several organ systems.” This finding is in line with earlier research findings.

In 2017, NHS Health Scotland issued a statement promoting the use of THR products, finding them “less harmful than smoking.” The Royal College of Physicians stated in 2016 the health hazards associated with THR products are “unlikely to exceed 5% of the harm [caused by] smoking.” In 2015, Public Health England acknowledged e-cigarettes to be an estimated “95% safer than smoking.”

Taxes levied on vaping products in addition to the state’s sales tax have not proven successful in other states. For example, in 2016, Pennsylvania imposed a vaping tax on “40% of the purchase price of the wholesaler or manufacturer.” Less than one year later, Pennsylvania state legislators attempted to reverse or reduce the scope of the tax because of the significant amount of harm it had caused. In a March 2017 news release, one legislator said the 40 percent tax “has already resulted in the closure of more than 100 small businesses and the loss of several hundred jobs in the industry.”

Imposing excise taxes on vapor products is not justified from a public health perspective, and it removes a prime economic incentive for smokers to improve their health by switching to e-cigarettes. The American Association of Public Health Physicians has concluded e-cigarettes “could save the lives of 4 million of the 8 million current adult American smokers who will otherwise die of a tobacco-related illness over the next 20 years.”

Lawmakers ought to promote e-cigarettes and vaping because these products could save states billions. In a 2017 policy study by R Street, Associate Fellow Richard B. Belzer examined the financial impact to Medicaid costs, should a number of current Medicaid recipients switch from combustible cigarettes to electronic cigarettes and vaping devices. Belzer used a sample size of “1% of smokers [within] demographic groups permanently” switching. Using this analysis, Belzer estimates that Medicaid savings “will be approximately $2.8 billion per 1 percent of enrollees,” over the next 25 years.

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Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute or Tobacco Harm Reduction 101.