Lawmakers introduced legislation in Nevada that would tax e-cigarettes and vaping products. The bill would also require wholesale dealers and retailers of these products to be licensed.

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Senate Bill 263 would apply Nevada’s other tobacco product tax, currently applied to tobacco products other than cigarettes,  on e-cigarettes at “30 percent of the wholesale price.” If passed into law, the legislation would charge retailers and wholesalers an annual license fee of $50 and $650, respectively.

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The tax would apply to all e-cigarette products, including e-liquids, regardless of whether they contain nicotine. The tax would also apply to other components, including “containers, atomizers, [and] batteries.”

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The proposed levy would be a floor tax, meaning it would apply to all existing inventory in retail locations. Retailers would be required to pay the tax on “vapor products dealers have in their inventory as of” July 1, 2019.

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Lawmakers should avoid draconian taxes on vaping products. E-cigarettes are significantly less harmful than combustible tobacco cigarettes and have helped millions of smokers quit. These products can also provide a positive impact to state budgets because they reduce health care costs associated with combustible tobacco cigarettes. Moreover, the electronic cigarette industry is a thriving industry for local and state economies.

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Electronic cigarettes and vaping devices are “95 % safer” than combustible cigarettes, according to Public Health England. In 2016, the Royal College of Physicians found e-cigarettes “unlikely to exceed 5% of the harm from smoking tobacco.” In 2018, the National Academies of Sciences, Engineering, and Medicine and the American Cancer Society noted the reduced harm of e-cigarettes and vaping devices.

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Of the estimated 10 million American adult vapers, nearly three million have used e-cigarettes to quit smoking. A 2019 study published in The New England Journal of Medicine finds the use of e-cigarettes and vaping devices to be “twice as effective as nicotine replacement [therapy] at helping smokers quit.”

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E-cigarettes help offset health care costs associated with tobacco cigarettes. In fact, Medicaid recipients smoke at rates “more than double for adults with private insurance,” according to the Centers for Disease Control and Prevention.

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State Budget Solutions concluded states would have saved $48 billion in 2012 if all Medicaid recipients who smoked tobacco cigarettes had switched to e-cigarettes. R Street Institute examined 1 percent of the same Medicaid population switching to e-cigarettes and estimated Medicaid savings “will be approximately $2.8 billion per 1 percent of enrollees” over the next 25 years.

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A 30 percent wholesale floor tax would decimate Nevada’s e-cigarette industry. In 2016, Pennsylvania applied a 40 percent wholesale tax to vaping devices. Within a year, about 120 vape shops, a third of all shops, closed in the Keystone State.

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Moreover, lawmakers should recognize the many economic benefits vape shops provide. A typical vape shop “[generates] annual non-online sales of more than $300,000 per store.” An analysis of vape shops in the San Francisco Bay area found stores employee, on average, three workers. The industry is also expected to continue to grow, with the global market “estimated to reach $44,610.6 million by 2023.”

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Rather than imposing a burdensome wholesale floor tax on e-cigarettes and vaping devices, which would essentially vaporize the industry, Nevada lawmakers should promote the use of tobacco harm reduction products. E-cigarettes have been successful tools in helping smokers quit, provide significant savings for the health care system and taxpayers, and deliver a shot in the arm to local and state economies.

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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.