Skip Navigation
Back to PolicyBot

Research & Commentary: New Jersey Proposal to Levy More Taxes on E-Cigarettes Would Harm Public Health

June 11, 2019

Proposed legislation would apply differing tax rates to e-cigarette products and require vape shops to be licensed by the state.

New Jersey lawmakers introduced legislation that would apply a complicated and convoluted new tax structure on e-cigarettes and vaping devices. The bill would also require all vape shops in the Garden State to purchases costly licenses.

Assembly Bill 5385 defines “e-liquid containers” as “a container of liquid nicotine or other liquid where the liquid is intended for use in electronic smoking devices,” but does not include “prefilled containers where the container is intended for use in an electronic smoking device (e.g cartridges).” The proposed legislation would apply a 10 percent tax to container e-liquids while removing the existing wholesale 10-cents-per-milliliter tax on these products.

Although the legislation is laudable and addresses the problem of tax parity among tobacco harm reduction products, lawmakers should refrain from enacting “sin taxes” on e-cigarettes and vaping devices, which have helped at least three million American adults quit smoking combustible cigarettes since their introduction to the U.S. market in 2007.

In 2007, electronic cigarettes and vaping devices debuted on the U.S. market. Since then, manufacturers added second-generation tank systems, followed by larger third-generation personal vaporizers, which vape users commonly call “mods.” In recent years, closed systems, often referred to as “pod systems,” have emerged as effective and popular e-cigarette products. Pod systems contain a disposable cartridge that is discarded after consumption.

Closed and open systems utilize the same three primary parts—a liquid, an atomizer with a heating element, and a battery—as well as other electronic parts. Mods allow users to manage flavorings and the amount of vapor produced by controlling the temperature that heats the e-liquid. Mods also permit consumers to control nicotine levels. Current nicotine levels in e-liquids range from zero to greater than 50 milligrams per milliliter. Many users have reduced their nicotine concentration levels after using vaping devices for a prolonged period, indicating nicotine is not the only reason people choose to vape.

New Jersey’s current tax rate of 10 cents per milliliter applies to closed and open systems, regardless of nicotine content. Though this legislation removes this burden from container e-liquids, lawmakers should move to remove all taxation on tobacco harm reduction products such as e-cigarettes.

Numerous public health groups, including the Royal College of Physicians, American Cancer Society, and the National Academies of Sciences, Engineering, and Medicine have acknowledged the reduced harm of electronic cigarettes and vaping devices.

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.”

Moreover, electronic cigarettes and vaping devices can actually reduce smoking-related health care costs. One analysis found that if all Medicaid recipients who smoke switched to e-cigarettes, state Medicaid programs would have saved $48 billion in 2012.

Although A.B. 5385 recognizes different types of electronic cigarette products, it ignores public health. E-cigarettes have emerged as one of the most effective tools to help smokers quit and lawmakers should promote their use instead of enacting unnecessary and counterproductive sin taxes on them.

The following documents provide more information about e-cigarettes and 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 a 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
In this Research & Commentary, Lindsey Stroud, a state government relations manager at The Heartland Institute, examines a study in The New England Journal of Medicine that shows e-cigarettes and vaping devices are twice as effective as nicotine replacement therapy (NRT) in helping smokers quit using tobacco cigarettes. Nearly 700 participants were studied during a 52-week period. Researchers found that 18 percent of e-cigarette users reported abstinence, compared to 9 percent of those using NRT. Stroud wrote 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,” and she implores policymakers to regulate these devices in a way that promotes, rather than prohibits, their use.

Research & Commentary: Vaping Taxes Do Not Deter Youth Use of E-Cigarettes
https://www.heartland.org/publications-resources/publications/research--commentary-vaping-taxes-do-not-deter-youth-use-of-e-cigarettes
In this Research & Commentary, Lindsey Stroud, a state government relations manager at The Heartland Institute, examines the effects of Pennsylvania’s 2016 40 percent wholesale tax on youth vaping. Using data from the Pennsylvania Annual Youth Survey, Stroud finds the tax did not curb youth e-cigarette use, and from 2015 to 2017, youth use of e-cigarettes increased in Pennsylvania. Stroud cautions lawmakers to avoid enacting taxes on e-cigarettes in an effort to address youth e-cigarette use.

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.

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.

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 Heartland’s government relations department, at governmentrelations@heartland.org or 312/377-4000.