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Research & Commentary: Illinois Should Not Tax E-Cigarettes and Vaping Devices

April 4, 2019

Proposed legislation would apply a 36 percent wholesale tax to e-cigarette products, regardless of nicotine content.

Illinois lawmakers, desperate for revenue, are considering taxing electronic cigarettes and vaping devices. Senate Bill 1124 would amend the Tobacco Product Tax Act of 1995 to include e-cigarettes in the definition of tobacco products.

The proposal would apply a 36 percent wholesale tax to all components of e-cigarettes, including “any device that employs a battery or other mechanism to heat a solution or substance to produce a vapor or aerosol intended for inhalation.” The bill would also tax all e-liquids, “whether or not it contains nicotine intended for use in the device.”

Gov. J.B. Pritzker is a proponent of the tax, hoping to use the funds “to balance his budget proposal.” However, lawmakers should refrain from taxing tobacco harm reduction devices such as e-cigarettes because these products are 95 percent safer than combustible cigarettes. Moreover, e-cigarettes and vaping devices are effective cessation tools that can help reduce the burden placed on states’ budgets by lessening smoking-related health care costs.

E-cigarettes are undoubtedly safer than combustible tobacco cigarettes. In 2015, Public Health England (PHE), a leading health agency in the United Kingdom similar to the U.S. Food and Drug Administration, found e-cigarettes are 95 percent safer than smoking. In 2018, PHE reiterated this claim, finding “vaping is at least 95% safer than smoking.” Other public health groups, including the Royal College of Physicians, National Academies of Sciences, Engineering, and Medicine, and the American Cancer Society have also acknowledged the reduced harm of e-cigarettes.

Approximately three million Americans have used e-cigarettes to quit smoking. A 2019 study in The New England Journal of Medicine found electronic cigarettes are “twice as effective as nicotine replacement [therapy] in helping smokers quit.”

Moreover, there is substantial evidence the use of vaping products can help states save money by reducing smoking-related health care costs. One study estimated that if all Medicaid recipients who smoke had switched to e-cigarettes, state Medicaid programs would have saved $48 billion in 2012. Another analysis used a “sample size of 1% of smokers [within] demographic groups permanently” switching. In this analysis, Medicaid savings were estimated to “be approximately $2.8 billion per 1 percent of enrollees” over the next 25 years.

Perhaps the most significant problem with the proposal is lawmakers aim to tax products that have helped smokers quit, yet they currently spend less than 1 percent of tobacco revenue on cessation and prevention efforts. In 2018, Illinois received an estimated “$1.129 billion in tobacco settlement payments and taxes,” but it spent only “7.3 million in state funds to tobacco prevention.”

The imposition of a tax on vaping products could also have negative fiscal results. In 2016, Pennsylvania passed a 40 percent wholesale floor tax on vaping devices. Within a year of the new tax, approximately 120 vape shops closed in the commonwealth. Ultimately, states lose revenue with these taxes because vape shops “generate annual non-online sales of more than $300,000 per store.”

Rather than imposing draconian taxes that would vaporize tobacco harm reduction efforts, Illinois lawmakers should embrace the use of e-cigarettes and vaping devices. Despite fearmongering, these products have proven to be effective cessation devices. They are drastically less harmful than combustible tobacco cigarettes, and they provide a boon to state and local economies.

The following articles provide more information about tobacco harm reduction.

Vaping, E-Cigarettes, and Public Policy Toward Alternatives to Smoking
https://www.heartland.org/publications-resources/publications/vaping-e-cigarettes-and-public-policy-toward-alternatives-to-smoking
For decades, lawmakers and regulators have used taxes, bans, and burdensome regulations as part of their attempt to reduce the negative health effects of smoking. Recently, some have sought to extend those policies to electronic cigarettes. This booklet from The Heartland Institute urges policymakers to re-think that tax-and-regulate strategy. Policymakers should be mindful of the extensive research that supports tobacco harm reduction and understand bans, excessive regulations, and high taxes on e-cigarettes often encourage smokers to continue using more-harmful traditional cigarette products.

Research & Commentary: Randomized Trial Finds E-Cigarettes Are More Effective Smoking Cessation Tool Than Nicotine Replacement Therapy
https://www.heartland.org/publications-resources/publications/research--commentary-randomized-trial-finds-e-cigarettes-are-more-effective-smoking-cessation-tool-than-nicotine-replacement-therapy
Lindsey Stroud, a State Government Relations Manager at The Heartland Institute examines a study in The New England Journal of Medicine that finds e-cigarettes and vaping devices to be twice as effective as nicotine replacement therapy (NRT) in helping smokers quit cigarettes. Nearly 700 participants were studied over a 52-week period, with researchers finding that 18 percent of e-cigarette users reported abstinence, compared to 9 percent of those using NRT. Stroud writes that “these latest findings provide more valuable information on the public health role that e-cigarettes and vaping devices provide for the 38 million cigarette smokers in the United States,” an implores policymakers to regulate these devices in a way that promotes their usage.

E-Cigarettes Are Making Tobacco Obsolete. So Why Ban Them?  
http://heartland.org/policy-documents/e-cigarettes-are-making-tobacco-obsolete-so-why-ban-them
Matt Ridley reports vaping works better than any other method of giving up smoking, examining several studies reaching that conclusion. With the success of vaping products, he asks, why are cities banning them?

Research & Commentary: Vaping Taxes and Bans Hurt Smokers Trying to Quit
https://www.heartland.org/publications-resources/publications/research--commentary-vaping-taxes-and-bans-hurt-smokers-trying-to-quit
In this Research & Commentary, Heartland Institute Senior Policy Analyst Matthew Glans and State Government Relations Manager Lindsey Stroud examine vaping bans and taxes and consider how such measures block or limit what is for many smokers an effective method for halting the use of tobacco cigarettes.

Podcast Series: Voices of Vapers
https://www.heartland.org/multimedia/podcasts?fromDate=&toDate=&q=voices+of+vapers
In this weekly podcast series, State Government Relations Manager Lindsey Stroud talks with researchers, advocates, and policymakers about tobacco harm reduction and electronic cigarettes. The series provides important information about the thousands of entrepreneurs who have started small businesses thanks to THRs and the millions of adults that have used electronic cigarettes and vaping devices to quit smoking tobacco cigarettes.

Research & Commentary: Randomized Trial Finds E-Cigarettes Are More Effective Smoking Cessation Tool Than Nicotine Replacement Therapy
https://www.heartland.org/publications-resources/publications/research--commentary-randomized-trial-finds-e-cigarettes-are-more-effective-smoking-cessation-tool-than-nicotine-replacement-therapy
Lindsey Stroud, a State Government Relations Manager at The Heartland Institute examines a study in The New England Journal of Medicine that finds e-cigarettes and vaping devices to be twice as effective as nicotine replacement therapy (NRT) in helping smokers quit cigarettes. Nearly 700 participants were studied over a 52-week period, with researchers finding that 18 percent of e-cigarette users reported abstinence, compared to 9 percent of those using NRT. Stroud writes that “these latest findings provide more valuable information on the public health role that e-cigarettes and vaping devices provide for the 38 million cigarette smokers in the United States,” an implores policymakers to regulate these devices in a way that promotes their usage.

Research & Commentary: Qualitative Study on E-cigarettes Shows More Evidence of Tobacco Harm Reduction
https://www.heartland.org/publications-resources/publications/qualitative-study-on-e-cigarettes-shows-more-evidence-of-tobacco-harm-reduction?source=policybot
In this Research & Commentary, Heartland Institute State Government Relations Manager Lindsey Stroud examines a study, published in The International Journal of Environmental Research and Public Health in June 2016, that provides additional evidence showing e-cigarettes and vaporized nicotine products (VNPs) are an effective tobacco harm-reduction tool.

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. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, Heartland’s Consumer Freedom Lounge, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Lennie Jarratt, a state government relations manager at Heartland, at ljarratt@heartland.org or 312/377-4000.

Author
Lindsey Stroud joined The Heartland Institute in 2016 as a Government Relations Coordinator. In 2017, Lindsey was named State Government Relations Manager.
lstroud@heartland.org