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June 17, 2019


Ohio lawmakers inserted a tax on electronic cigarettes and vaping devices in their fiscal year 2020–21 operating budget. The new budget would also raise the age to purchase tobacco products, including e-cigarettes, from 18 to 21. Substitute House Bill 166 would apply a 17 percent wholesale tax on e-cigarette products, which is the same excise tax rate currently imposed on other tobacco products, including cigars and pipes.

Sub. H.B. 166 would define vapor products as “any component, part, or additive that is intended for use in an electronic smoking device, a mechanical heating element, battery, or electronic circuit and is used to deliver the product.” All collected tax revenue would be earmarked to the state’s general fund.

Lawmakers should not impose “sin taxes” on tobacco harm reduction products. Since their introduction to the U.S. market, an estimated three million American adults have used e-cigarettes and vaping devices to quit smoking. Moreover, a 2019 study in The New England Journal of Medicine found the use of e-cigarettes to be “twice as effective” as nicotine replacement therapy.

Some Ohio senators argue a tax on e-cigarettes would deter youth tobacco and nicotine use. Indeed, Sen. Matt Dolan (R-Chargin Falls) said, “If we’re going to be able to discourage its use and help regulate it, it needed to be part of the taxing authority.” Although their intent is laudable, there is no evidence vaping taxes reduce youth use of e-cigarettes.

There is no evidence vaping taxes will stop youth use of vaping devices. In 2016, Pennsylvania enacted a 40 percent wholesale tax on vaping products. A Heartland Institute analysis on the effects of Pennsylvania’s wholesale tax on youth e-cigarette use found young Pennsylvanians in middle and high school actually increased their use of e-cigarettes in the period following the implementation of the tax. Notably, e-cigarette use among 10th and 12th graders increased from 20.4 and 27 percent, respectively, in 2015 to 21.9 and 29.3 percent in 2017.

Pennsylvania’s wholesale tax had a disastrous effect on small businesses as well. Within a year of its implementation, an estimated 120 vape shops went out of business in the Keystone State. This carries significant economic consequences. Vape shops “generate annual non-online sales of more than $300,000 per store.”

The proposed legislation also fails to take into account the public health gains e-cigarettes provide. In 2015, Public Health England noted the use of e-cigarettes to be “95% safer than smoking.” Other public health organizations including the Royal College of Physicians, National Academies of Sciences, Engineering, and Medicine, and the American Cancer Society have acknowledged the reduced harm of e-cigarette use.

Further, the use of e-cigarettes could actually reduce health care costs for Ohioans. A 2015 analysis examined e-cigarettes’ effect on Medicaid spending. The study found Medicaid savings could have amounted to $48 billion in 2012 if e-cigarettes had been adopted in place of combustible tobacco cigarettes by all Medicaid recipients who currently smoke.

A 2017 study examined a smaller number of Medicaid recipients using e-cigarettes instead of combustible cigarettes. In this analysis, the author estimates that Medicaid savings “will be approximately $2.8 billion per 1 percent of enrollees” over the next 25 years.

Perhaps most problematic is Ohio’s intention to tax those who have quit smoking combustible cigarettes through the use of e-cigarettes. Ohio dedicates very little funding to help smokers quit. In 2018 Ohio “received $1.332 billion in tobacco settlement payments and taxes.” Of this, only $12.5 million, or less than 1 percent, was dedicated to tobacco prevention and cessation programs.

Rather than imposing draconian taxes on products that are significantly less harmful than combustible cigarettes, lawmakers should encourage their use. As a tobacco harm reduction tool, e-cigarettes are effective smoking cessation devices and should not be subjected to sin taxes.  

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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