UTAH’S PROPOSED E-CIGARETTE TAX WILL SNUFF OUT HARM REDUCTION

February 19, 2019

  • Recently introduced legislation would apply an 86.5 percent tax on e-cigarettes and vaping products.

  • The legislation’s author intends to put “the price point up” to make it difficult for youth to purchase e-cigarettes.

  • Less than 10 percent of the funds that would be generated by the proposed tax would go toward tobacco prevention and education, and more than 90 percent of the expected revenue is earmarked to the state’s General Fund.

  • Electronic cigarettes are tobacco harm reduction products that heat a solution of water, nicotine, propylene glycol, vegetable glycerin, and a flavoring to produce a vapor that is less harmful than the smoke produced by the 7,000 chemicals contained in combustible cigarettes.

  • Numerous public health groups have determined e-cigarettes are much less harmful than combustible tobacco products.

  • These are consistent with findings from public health organizations in the United Kingdom.

  • An analysis that estimated the potential benefits that would occur if all current Medicaid recipients who use combustible tobacco were to switch to e-cigarettes found that Medicaid savings could have amounted to $48 billion in 2012.

  • A smaller study found Medicaid savings “would be approximately $2.8 billion per 1 percent of [Medicaid] enrollees” over the next 25 years.

  • The proposed legislation would negatively impact Utah’s 263 vape shops. After Pennsylvania passed a 40 percent wholesale tax on e-cigarettes in 2016, an estimated 120 vape shops closed.

  • While the legislation is aimed at addressing youth vaping, it fails to recognize the wealth of data on youth purchases that show youth vaping is not a significant problem.

  • According to data from the U.S. Food and Drug Administration, compliance checks in Utah from 2016 and 2017 show in 2,630 compliance checks, only 115 businesses were in violation of selling a tobacco product to a minor, and the majority of those businesses are convenience stores, not vape shops.

Lawmakers in Utah have introduced legislation that would apply an 86.5 percent tax on e-cigarettes and vaping products. The legislation’s author intends to put “the price point up” to make it difficult for youth to purchase e-cigarettes. While addressing youth e-cigarette use is commendable, the draconian tax that would be placed on tobacco harm reduction (THR) products would threaten the public health gains e-cigarettes provide and hurt small businesses. Moreover, less than 10 percent of the funds that would be generated by the proposed tax would go toward tobacco prevention and education, as more than 90 percent of the expected revenue is earmarked to the state’s General Fund.

Electronic cigarettes and vaping devices are considered THR products. Electronic cigarettes heat a solution of water, nicotine, propylene glycol, vegetable glycerin, and a flavoring to produce a vapor that is less harmful than the smoke produced by the 7,000 chemicals contained in combustible cigarettes.

Numerous public health groups have determined e-cigarettes are much less harmful than combustible tobacco products. In 2018, the American Cancer Society noted, “the exclusive use of e-cigarettes is preferable to continuing to smoke combustible cigarettes.” The same year, the National Academies of Sciences, Engineering, and Medicine determined switching from combustible cigarettes to e-cigarettes “results in reduced short-term adverse health outcomes in several organ systems.”

These are consistent with findings from public health organizations in the United Kingdom. Public Health England (PHE) and the Royal College of Physicians have found e-cigarettes are 95 percent less harmful than combustible cigarettes. In December 2018, PHE maintained “that vaping is 95% less harmful than tobacco,” and the U.K. government launched a “new campaign to try to convince the UK’s smokers that vaping is not as harmful as smoking and a good way to quit.”

Moreover, the reduced harms resulting from the use of e-cigarettes is helpful to state budgets and lawmakers, who continuously grapple with the health costs associated with combustible cigarettes. An analysis that estimated the potential benefits that would occur if all current Medicaid recipients who use combustible tobacco were to switch to e-cigarettes found that Medicaid savings could have amounted to $48 billion in 2012. A smaller study found Medicaid savings “would be approximately $2.8 billion per 1 percent of [Medicaid] enrollees” over the next 25 years.

Additionally, the proposed legislation would negatively impact Utah’s 263 vape shops. After Pennsylvania passed a 40 percent wholesale tax on e-cigarettes in 2016, an estimated 120 vape shops closed. It is estimated that vape shops “generate annual non-online sales of more than $300,00 per store” and average $26,000 in monthly sales. The proposed legislation would likely drive current and new vapers to turn to internet-based distributors. E-cigarette online sales grew 41.3 percent from 2016 to 2017, from $345 million to $487.7 million. 

While the legislation is aimed at addressing youth vaping, it fails to recognize the wealth of data on youth purchases that show youth vaping is not a significant problem. According to data from the U.S. Food and Drug Administration, compliance checks in Utah from 2016 and 2017 show in 2,630 compliance checks, only 115 businesses were in violation of selling a tobacco product to a minor, and the majority of those businesses are convenience stores, not vape shops.

Policymakers should also know the e-cigarette industry overwhelmingly supports preventing youth e-cigarette use. The Smoke Free Alternatives Trade Association provides “Age to Vape” signage to vape shops endorsing local laws. The Consumers for Smoke-Free Alternatives Association “supports laws that prohibit underage sales and encourages strict enforcement of laws” that ban access to e-cigarettes to minors. The Vapor Technology Association, which represents vaping manufacturers, requires members to “refrain from knowingly marketing Vapor Products to Minors,” which is strictly prohibited.

Rather than imposing a massive tax that would essentially eradicate THR in Utah, lawmakers should promote the use of these products and dedicate more funds toward preventing youth e-cigarette use. Further, revenues generated by taxes imposed on THR products should never be dedicated to a state’s general fund and should always be earmarked for tobacco cessation and prevention.

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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