MAINE’S PROPOSED CIGARETTE AND VAPE TAXES WOULD HURT THE POOR, THREATEN HARM REDUCTION

April 23, 2019

KEY POINTS:

  • Legislative Document 1028 aims to increase the state’s cigarette tax from “$2.00 to $3.50 per pack of 20 cigarettes.”

    • It would also increase the tax on other tobacco products to 81 percent “of the wholesale sales price.”

    • It would also include e-cigarettes in the state’s definition of “Other Tobacco Products.”

  • Existing research shows cigarette taxes disproportionately impact lower-income persons. For example, a Cato Journal article notes that from 2010 to 2011, “smokers earning less than $30,000 per year spent 14.2 percent of their household income on cigarettes, compared to 4.3 percent for smokers earning between $30,000 and $59,999 and 2 percent for smokers earning more than $60,000.”

  • Neighboring New Hampshire taxes cigarettes at $1.78 per pack, significantly less than Maine’s proposed tax. If Maine lawmakers do raise the state’s cigarette taxes, increasingly more Mainers will likely travel across the border to New Hampshire to buy their tobacco products.

  • Taxing electronic cigarettes and vaping devices would be a disservice to public health. Of the 10 million adult vapers in the United States, an estimated three million have used e-cigarettes to quit smoking.

  • A recent study found e-cigarettes to be “twice as effective as nicotine replacement therapy in helping smokers quit.”

  • Maine dedicates little revenue in helping smokers quit.

    • In 2018, Maine earned an estimated $196.8 million in tobacco settlement payments and taxes, yet only spent $5.3 million, or 2.7 percent, on prevention and cessation efforts.

    • For fiscal year 2019, Maine dedicated even less to tobacco prevention: $4.8 million of $188.5 million, or 2.6 percent.

Legislation in Maine would increase the state’s cigarette excise tax and apply a wholesale tax to e-cigarettes and vaping devices. Legislative Document 1028 aims to increase the state’s cigarette tax from “$2.00 to $3.50 per pack of 20 cigarettes,” and it would increase the tax on other tobacco products to 81 percent “of the wholesale sales price.” It would also include e-cigarettes in the state’s definition of “Other Tobacco Products.”

Lawmakers intend to use $11 million of the expected generated revenue to fund “prevention and cessation” efforts in Maine. Although intending to reduce tobacco smoking rates is laudable, cigarette taxes should be avoided because they disproportionately burden lower-income people and often do not result in healthier communities.

Moreover, lawmakers should not enact sin taxes on e-cigarettes and vaping devices because these products are tobacco harm reduction tools that have helped millions of American adults quit smoking.

Existing research shows cigarette taxes disproportionately impact lower-income persons. For example, a Cato Journal article notes that from 2010 to 2011, “smokers earning less than $30,000 per year spent 14.2 percent of their household income on cigarettes, compared to 4.3 percent for smokers earning between $30,000 and $59,999 and 2 percent for smokers earning more than $60,000.”

Raising the excise tax on cigarettes would likely increase smuggling and out-of-state purchases of cigarettes. Maine already has the 15th highest cigarette taxes in the nation, according to the Tax Foundation. L.D. 1028 would make Maine’s tax the fifth highest.

This is especially problematic because neighboring New Hampshire taxes cigarettes at $1.78 per pack, significantly less than Maine’s proposed tax. If Maine lawmakers do raise the state’s cigarette taxes, increasingly more Mainers will likely travel across the border to New Hampshire to buy their tobacco products.

Even more importantly, taxing electronic cigarettes and vaping devices would be a disservice to public health. Of the 10 million adult vapers in the United States, an estimated three million have used e-cigarettes to quit smoking. A recent study in the New England Journal of Medicine found e-cigarettes to be “twice as effective as nicotine replacement therapy in helping smokers quit.”

Existing literature also finds the use of vaping devices could save governments money. R Street Institute analyzed what would occur if 1 percent of Medicaid recipients that smoke tobacco cigarettes were to switch to e-cigarettes. In its analysis, R Street found Medicaid savings would be “approximately $2.8 billion per 1 percent of enrollees” over the next 25 years.

E-cigarettes also generate revenue for state and local economies. One analysis found vape shops “generate annual non-online sales of more than $300,000 per store.” And the industry is expected to continue to grow in the coming years. Online sales of e-cigarettes increased by 41.3 percent from 2017 to 2018, from $345 million to $487.7 million. The global electronic cigarette market “is estimated to reach $44,610.6 million by 2023.”

It is interesting lawmakers in Maine want to increase the state’s cigarette tax to pay for “cessation and prevention,” when the state spends little of the money it receives from tobacco settlements on such efforts. In 2018, Maine earned an estimated $196.8 million in tobacco settlement payments and taxes, yet only spent $5.3 million, or 2.7 percent, on prevention and cessation efforts. For fiscal year 2019, Maine dedicated even less to tobacco prevention: $4.8 million of $188.5 million, or 2.6 percent.

Rather than imposing draconian taxes on vaping products and increasing the state’s already high cigarette tax, lawmakers should reform how they currently spend tobacco funds.

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.

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