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Research & Commentary: Increasing Vaping Tax Would Hurt New Jerseyans Trying to Quit

June 17, 2018

In this Research & Commentary, Matthew Glans and Lindsey Stroud examine a new tax on vaping products now being considered in New Jersey and the possible effects on smokers trying to quit.

Electronic cigarettes are growing in popularity, and as a result, state and local governments are considering whether and how the products should be regulated and taxed. Legislators in New Jersey are currently examining a new proposal from Gov. Phil Murphy in the New Jersey State Budget that would create a substantial tax on vaping products. Two current versions of the tax are under consideration: the first bill, being considered in the Assembly, would create a 10-cents-per-milliliter tax on vaping products, and the second, being considered in the Senate would double the tax and create a 20-cents-per-milliliter levy.

Discouraging smoking is a laudable goal, so why are some New Jersey lawmakers attempting to tax a less-harmful alternative? E-cigarette taxes have many negative effects, including driving residents to buy untaxed or lower-taxed products elsewhere, reducing revenues for retailers in the state, and unduly burdening low- and moderate-income families.

Opponents of taxes on e-cigarettes and vaping devices, also called tobacco harm reduction (THR) products, argue they are counterproductive and offset some of the public health gains these products provide. These claims are supported by the available research, which shows e-cigarettes and vaping products are significantly less harmful than tobacco cigarettes.

Electronic cigarettes have proven to be effective products for tobacco harm reduction. In a Heartland Institute booklet titled “Vaping, E-Cigarettes, and Public Policy Toward Alternatives to Smoking,” Dr. Brad Rodu, senior fellow for Heartland, argued, “It is the smoke produced by burning tobacco, not the ingestion of nicotine, that ought to be the target of public health campaigns.”

In 2018, the National Academies of Sciences, Engineering, and Medicine concluded switching from combustible cigarettes to e-cigarettes “results in reduced short-term adverse health outcomes in several organ systems.” This finding is in line with earlier research findings.

In 2017, NHS Health Scotland issued a statement promoting the use of THR products, finding them “less harmful than smoking.” The Royal College of Physicians stated in 2016 the health hazards associated with THR products are “unlikely to exceed 5% of the harm [caused by] smoking.” In 2015, Public Health England acknowledged e-cigarettes to be an estimated “95% safer than smoking.

Taxes levied on vaping products in addition to the state’s sales tax have not proven successful in other states. For example, in 2016, Pennsylvania imposed a vaping tax on “40% of the purchase price of the wholesaler or manufacturer.” Less than one year later, Pennsylvania state legislators attempted to reverse or reduce the scope of the tax because of the significant amount of harm it had caused. In a March 2017 news release, one legislator said the 40 percent tax “has already resulted in the closure of more than 100 small businesses and the loss of several hundred jobs in the industry.”

Imposing excise taxes on vapor products is not justified from a public health perspective, and it removes a prime economic incentive for smokers to improve their health by switching to e-cigarettes. The American Association of Public Health Physicians has concluded e-cigarettes “could save the lives of 4 million of the 8 million current adult American smokers who will otherwise die of a tobacco-related illness over the next 20 years.”

Lawmakers ought to promote e-cigarettes and vaping because these products could save states billions. In a 2017 policy study by R Street, Associate Fellow Richard B. Belzer examined the financial impact to Medicaid costs, should a number of current Medicaid recipients switch from combustible cigarettes to electronic cigarettes and vaping devices. Belzer used a sample size of “1% of smokers [within] demographic groups permanently” switching. Using this analysis, Belzer estimates that Medicaid savings “will be approximately $2.8 billion per 1 percent of enrollees,” over the next 25 years.

The following documents provide further information on 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: Cities and Sates Consider Increasing Tobacco Age Limit to 21, Regulating ENDS as Tobacco Products
https://www.heartland.org/publications-resources/publications/research--commentary-cities-and-states-consider-increasing-tobacco-age-limit-to-21-regulating-ends-like-tobacco-products
In this Research & Commentary, Heartland Institute State Government Relations Manager Lindsey Stroud examines the states and municipalities that are considering increasing their smoking age from 18 to 21. Stroud says such laws fail to substantially curb consumption, and she argues the inclusion of tobacco harm reduction tools, such as e-cigarettes and vaping devices, would negatively impact the health gains these products have been repeatedly shown to provide.

Research & Commentary: Study Finds E-Cigarettes Would Prevent 6.6 Million Premature Deaths
https://www.heartland.org/publications-resources/publications/research--commentary-study-finds-e-cigarettes-would-prevent-66-million-premature-deaths
In this Research & Commentary, Heartland Institute State Government Relations Manager Lindsey Stroud examines an October 2017 Tobacco Control study that found electronic nicotine delivery systems (ENDS) might help extend life for millions of people. The authors of the study found there was an estimated 6.6 million fewer deaths and more than 86 million fewer-life-years lost over a ten year period because of ENDS products. Stroud concludes the use of ENDS could also help improve the budgets of numerous state programs, including Medicaid.

Research & Commentary: Public Health Officials Urge Use of Electronic Nicotine Delivery Systems
https://www.heartland.org/publications-resources/publications/public-health-officials-urge-use-of-electronic-nicotine-delivery-systems
In this Research & Commentary, Heartland Institute State Government Relations Manager Lindsey Stroud notes the importance of NHS Health Scotland’s joint statement encouraging the use of electronic nicotine delivery systems (ENDS) as an alternative to tobacco products. NHS Health Scotland, Public Health England, and other groups have found ENDS are 95 percent less harmful than tobacco cigarettes.

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 Manger 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.

E-Cigarette Primer for State and Local Lawmakers
http://heartland.org/policy-documents/e-cigarette-primer-state-and-local-lawmakers
Joel Nitzkin provides evidence e-cigarettes work as a tobacco harm reduction modality and reviews the arguments against them. He closes with recommendations for actions state and local lawmakers should and should not consider regarding tobacco harm reduction and e-cigarettes. 

Research & Commentary: New CDC Report Finds Vaping Helps Smokers Quit
https://www.heartland.org/policy-documents/research-commentary-new-cdc-report-finds-vaping-helps-smokers-quit
A new report released by the Centers for Disease Control and Prevention (CDC) found only 0.4 percent of the people who had never smoked tobacco in a CDC study group are current vapers, which the report defines as using a vaping device either every day or some days. The CDC report, the first of its kind, estimates e-cigarette use among U.S. adults using a nationally representative household survey. The report’s findings claim only 3.4 of adults who have never smoked have tried an e-cigarette; 12.6 percent of Americans have tried an e-cigarette; and fewer than 4 percent of the U.S. population are regular e-cigarette users.

E-Cigarettes Poised to Save Medicaid Billions
https://www.heartland.org/policy-documents/e-cigarettes-poised-save-medicaid-billions
In a new report from State Budget Solutions, J. Scott Moody finds e-cigarette use could create significant savings for state governments, especially in their Medicaid programs: “As shown in this study, the potential savings to Medicaid significantly exceeds [sic] the state revenue raised from the cigarette excise tax and tobacco settlement payments by 87%. As such, the rational policy decision is to adopt a non-interventionist stance toward the evolution and adoption of the e-cig until hard evidence proves otherwise.”

 

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, our Consumer Freedom Lounge, and PolicyBot, Heartland’s free online research database.

Whether sending an expert to your state to testify or brief your caucus, hosting an event in your state, or simply sending you further information on the topic, Heartland can assist you. If you have any questions or comments, contact State Government Relations Manager Arianna Wilkerson at awilkerson@heartland.org or 312/377-4000.

Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR
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