Some tobacco control organizations see no difference between cigarettes and e-cigarettes and insist the two products be taxed similarly. However, e-cigarettes are a completely different product than traditional combustible cigarettes and therefore should be regulated and taxed differently.
As of May 2017 only the District of Columbia, California, Kansas, Louisiana, Minnesota, North Carolina, Pennsylvania, and West Virginia place an excise tax on e-cigarettes and other vapor products. Minnesota subjects e-cigarette products to a tax of 95 percent of the wholesale price. North Carolina charges an excise tax rate of 5 cents per milliliter of nicotine liquid.
Minnesota’s approach is an example of how not to tax vapor products, as the high rate of taxation removes an important incentive for smokers to switch. North Carolina’s approach, while less discriminatory, is still premature and unwarranted.
Ultimately, lawmakers should resist calls from activist groups to place undue regulations and taxes on this growing industry. The imposition of excise taxes on e-cigarettes will take away an important economic incentive for smokers to improve their health and switch to e-cigarettes.
Imposing burdensome tobacco taxes on a product many anti-smoking public health advocates endorse as a way to reduce the toll of smoking is neither sound tax policy nor a wise health policy. The best tax policy is to subject e-cigarettes and other vapor products only to state and local sales taxes.