Tax Increase Adds Insult to Injury for Already-Suffering Vape Shops in New York
After essentially shutting down vape shops by banning flavored e-cigarettes, legislators are looking at increasing the excise tax on the sale of vapor products. A11123 would increase the tax rate on vapor products, from 20 percent of the retail price to 48 percent. It would also increase that tax rate on “tobacco products other than little cigars,” from 75 percent of the wholesale price to 129 percent.
The author of the bill justifies the legislation, stating that “regularly increasing taxes on tobacco products is one of the most effective ways to reduce new tobacco initiation and encourage cessation.” Further, the bill’s author notes the tax would “discourage tobacco use, reduce health care costs, and improve health outcomes for New Yorkers.”
Excise taxes are used to deter persons from certain behaviors and should not be imposed on e-cigarettes and vapor products. The products are tobacco harm reduction tools and are significantly less harmful than combustible cigarettes. In 2015, Public Health England, a leading health agency in the United Kingdom and similar to the FDA found “that using [e-cigarettes are] around 95% safer than smoking,” and that their use “could help reducing smoking related disease, death and health inequalities.” In 2018, the agency reiterated their findings, finding vaping to be “at least 95% less harmful than smoking.” Other public health groups including the Royal College of Physicians, the National Academies of Sciences, Engineering and Medicine, and the American Cancer Society have all acknowledged the reduced harm provided by electronic cigarettes. Rather than impose taxes on these products, policymakers ought to promote their use as they are twice as effective as nicotine replacement therapy in helping smokers quit.
It should be noted that New York has already effectively shut down resident’s access to tobacco harm reduction products, as the Empire State’s ban on flavored e-cigarettes went into effect May 18, 2020. Either manufacturers are unaware or there is little enforcement, as the New York State Attorney General Letitia James posted on Facebook on July 20 that she was able to purchased flavored vapor products online, over two months after the ban went into effect. According to a Filter article published in July, the flavor ban created a “thriving illicit market” in not only New York, but also in Massachusetts and New Jersey.
Due to high taxes, New York already has a formidable illicit combustible cigarette market. According to the Tax Foundation, the Empire State “is the highest net importer of smuggled cigarettes, totaling 53.2 percent of total cigarette consumption in the state.” Undoubtedly, a steeper tax on vapor and other tobacco products would cause users of these to turn towards black market products.
Often, policymakers justify taxes on vapor products to deter youth use of e-cigarettes, however, there is little to no evidence that taxes actually prevent youth usage. Tobacco Harm Reduction 101 analyzed the effects of vapor taxes in six states. From 2017 to 2019, current e-cigarette use among high school students increased, even with excise taxes imposed on such products.
Moreover, it is utterly disgraceful that Empire State lawmakers would seek additional revenue from persons that have quit smoking, as the state spends very little on funding programs to help them quit. In 2019, New York received an estimated $2.0371 billion in tobacco taxes and tobacco settlement payments. In the same year, the state spent only $39.4 million, or 2 percent, on funding tobacco control programs, including education and prevention. In 2019, 13.1 percent of New York adults smoked tobacco cigarettes, amounting to over 2 million smokers. In the same year, New York allocated only $19.50 per smoker on tobacco control programs. When figuring for a pack-per-day habit, the state collected $1,587.75 in excise taxes from each of those 2 million smokers.
It is disingenuous for lawmakers to impose excise taxes on products that are significantly less harmful than combustible cigarettes. It is even more nefarious to do so in a state that dedicates only 2 percent of exiting tobacco monies to tobacco control programs. As the Empire State has already banned the sales of flavored vapor products, most sales have gone underground and it is unlikely this tax will have minimal effect on black market and illicit sales of such products.
Nothing in this analysis is intended to is intended to influence the passage of legislation, and it does not necessarily represent the views of Tobacco Harm Reduction 101. For more information on tobacco and vapor products in the Empire State, please visit Tobacco Harm Reduction 101’s New York page at https://www.thr101.org/new-york.