Image by Ian Baldwin

PROPOSED GEORGIA TOBACCO AND VAPOR TAXES ARE REGRESSIVE,

IGNORE TOBACCO HARM REDUCTION

June 23, 2020

By: Lindsey Stroud

KEY POINTS:

  • House Bill 1229 would increase the excise tax on cigarettes by $1.50, from $0.37 per pack to $1.87/pack. The legislation would also tax vapor products at rate of 39 percent of the wholesale price. 

  • In Georgia, lower income adults are more likely to be current cigarette smokers.

    • According to the Georgia Behavioral Risk Factor Surveillance System, in 2014, 73 percent of current smokers had incomes of $34,999 per year or less.

    • 33.5 percent of smokers had incomes that were less than $15,000.

    • In 2014, over 31 percent of smokers in Georgia had less than a high school education, compared to 5.6 percent of smokers that were college graduates.

    • Uninsured adults were twice as like to smoke, with 31.4 percent of current smokers having no health insurance, compared to 15.4 percent that had health insurance in 2014.

  • Approximately 11,700 adults die each year in Georgia due to smoking. Smoking-related health care costs exceed $3 billion each year in Georgia and the state’s Medicaid system spends $650.4 million per year on smoking-related health care.

  • Georgia allocates very little of existing tobacco monies to tobacco control programs.

  • In 2019, Georgia collected an estimated $393.3 million in revenue from tobacco settlement payments and tobacco taxes. In the same year the Peach State dedicated only $750,000 – less than 1 percent of tobacco monies – to tobacco control programs, including education and prevention.

  • The vapor industry has been an economic boon to Georgia.

    • In 2018, the industry created 2,532 direct vaping-related jobs, including manufacturing, retail, and wholesale jobs in Georgia, which generated $87 million in wages alone.

    • Moreover, the industry has created hundreds of secondary jobs in the Peach State, bringing the total economic impact in 2018 to $644,293,500.

    •  In the same year, Georgia received more than $38 million in state taxes attributable to the vaping industry.

  • A 2015 policy analysis by State Budget Solutions examined electronic cigarettes’ impact on Medicaid spending. The author estimated 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 consume these products.

  • This would have amounted to over $810 million in Medicaid savings to Georgia in 2012.

Lawmakers in the Peach State have introduced legislation that would increase the excise tax on cigarettes and tobacco products, as well as create a new tax on electronic cigarettes and vapor products. If passed, House Bill 1229 would increase the excise tax on cigarettes by $1.50, from $0.37 per pack to $1.87/pack. The legislation would also tax vapor products at rate of 39 percent of the wholesale price. 

Lawmakers should refrain from increasing and/or applying excise taxes to tobacco and vapor products. Excise taxes, or “sin” taxes, are often applied to “sin” products including alcohol, tobacco and sugary products. These taxes are justified as these products tend to increase health care costs.

Unfortunately, excise taxes are inherently regressive. For example, tobacco taxes disproportionately impact lower-income people, who spend a greater share of their income on tobacco products. 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.”

In Georgia, lower income adults are more likely to be current cigarette smokers. For example, according to the Georgia Behavioral Risk Factor Surveillance System, in 2014, 73 percent of current smokers had incomes of $34,999 per year or less. Indeed, 33.5 percent of smokers had incomes that were less than $15,000. In 2014, over 31 percent of smokers in Georgia had less than a high school education, compared to 5.6 percent of smokers that were college graduates. Finally, uninsured adults were twice as like to smoke, with 31.4 percent of current smokers having no health insurance, compared to 15.4 percent that had health insurance in 2014.

Moreover, lawmakers are simply using the tax as a revenue grab and no monies are to be dedicated to programs that can help smokers quit. Approximately 11,700 adults die each year in Georgia due to smoking. Smoking-related health care costs exceed $3 billion each year in Georgia and the state’s Medicaid system spends $650.4 million per year on smoking-related health care.

Worse, Georgia allocates very little of existing tobacco monies to tobacco control programs. For example, in 2019, Georgia collected an estimated $393.3 million in revenue from tobacco settlement payments and tobacco taxes. In the same year the Peach State dedicated only $750,000 – less than 1 percent of tobacco monies – to tobacco control programs, including education and prevention.

Deeply problematic is that lawmakers are seeking to now tax individuals who have used e-cigarettes and vapor products to quit smoking. It is estimated that at least 3 million American adults have used e-cigarettes to successfully quit smoking. Indeed, one 2019 study found the use of e-cigarettes to be twice as effective as traditional nicotine replacement therapy in helping smoker quit.

Further, the vapor industry has been an economic boon to Georgia. In 2018, the industry created 2,532 direct vaping-related jobs, including manufacturing, retail, and wholesale jobs in Georgia, which generated $87 million in wages alone. Moreover, the industry has created hundreds of secondary jobs in the Peach State, bringing the total economic impact in 2018 to $644,293,500. In the same year, Georgia received more than $38 million in state taxes attributable to the vaping industry. These figures do not include sales in convenience stores, which sell vapor products including disposables and prefilled cartridges. In 2016, sales of these products in Georgia eclipsed $18.8 million.

The use of e-cigarettes can also alleviate health care costs in the Peach State.  A 2015 policy analysis by State Budget Solutions examined electronic cigarettes’ impact on Medicaid spending. The author estimated 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 consume these products. This would have amounted to over $810 million in Medicaid savings to Georgia in 2012.

Lawmakers should refrain from increasing taxes on tobacco products and creating a new excise tax on tobacco harm reduction products, including e-cigarettes. Tobacco taxes are inherently regressive and lawmakers should be promoting the use of vapor products as a tobacco harm reduction tool – not taxing those who have quit smoking.

 

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 vapor products in Georgia, please visit Tobacco Harm Reduction 101’s Georgia page at www.thr101.org/georgia. 

  • Facebook
  • Twitter
  • Instagram

©2020 by Tobacco Harm Reduction 101.