Vaping manufacturers aren’t particularly popular these days, so it’s no surprise that Democrats turned to the industry as a potentially lucrative source of revenue for their spending package.
The companies first sparked outrage by introducing an entirely new generation of teens to addictive nicotine products, including those with fruity or candy flavors. Then there was the epidemic of lung diseases caused by unregulated cannabis vaping products. The outbreak killed almost 70 Americans — mostly young people — and hospitalized more than 2,000 others. While the deaths were all linked to chemicals in black market products, the episode intensified anti-vaping fervor.
But that’s not the whole story. With proper regulation, e-cigarettes can have substantial benefits. Research has consistently shown that the devices can be effective tools for people to quit combustible smoking. This is important because, although vaping delivers high amounts of addictive nicotine, it does so with far fewer dangerous chemicals than in traditional cigarettes. Indeed, vaping has shown to be a significantly more effective smoking cessation treatment than other strategies, such as nicotine patches.
In other words, e-cigarettes are an effective substitute for tobacco for many people. But like any other substitute, they lose their appeal when they become more expensive. And that’s why the Democrats’ proposed vaping tax makes no sense.
Under the current proposal, the federal government would levy a tax on vapor products based on nicotine content. For the typical pod-based device, that would come out to about $2.25 per pod — even more than the new $2.01 rate imposed on a pack of cigarettes.
There’s already a large body of economic research showing that taxes on e-cigarettes can have substantial unintended consequences. One recent study, funded by the National Institutes of Health, reviewed retail data from 2011 to 2017 — when multiple states and local governments instituted their own e-cigarette taxes — and found that a $1 increase in such taxes reduced sales of the devices by 29 percent and increased sales of traditional cigarettes by 10 percent. Another paper from 2019 estimates that Minnesota’s vaping tax prevented more than 32,000 adult smokers from quitting.
Even worse, a recent study shows that e-cigarette taxes can affect the behavior of young people — not by deterring them from vaping, but by encouraging them to take up cigarettes instead. The study also suggests that taxes might draw teens away from retailers and toward more dangerous unregulated markets. So a new vaping tax risks exactly the opposite effect of what anti-vaping advocates intend.
This will likely frustrate Democrats, as taxes on e-cigarettes could produce a substantial amount of revenue. (The proposed tax hike for all tobacco and nicotine products is projected to raise $96 billion over 10 years). More importantly, it demonstrates that the spike in vaping among teens is an important public-health issue with no easy answers.
Vaping is, whether people like it or not, here to stay. And unfortunately, that includes among many teens, thanks in large part to shameless efforts by vaping companies to illegally market their products to children. That means any policy on e-cigarettes must be crafted with two aims in mind: It must make certain that young people don’t take up traditional smoking, and it must make it easier for adult smokers to quit.
There are far better ways to do this than taxing the products. First and foremost is by rigorously enforcing age restrictions on vaping products, both in person and online. Lawmakers can help do this by setting up strict licensing mechanisms for retailers that sell the products. The government should also continue to crack down on companies that market their products to young people.
And if lawmakers insist on taxing e-cigarettes, fine. But then make sure that taxes for traditional tobacco products — including state and local taxes — remain considerably higher. Use the substitution effect to our advantage.
The vaping industry is a tempting political target. But the proposed tax on its products is the wrong way to reduce the scourge of smoking.