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Research & Commentary: New Taxes, Regulations Proposed for E-Cigarettes in Indiana

February 18, 2015

As the use of electronic cigarettes has grown, state and local governments across the nation have moved to increase taxes on these products.

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As the use of electronic cigarettes has grown, state and local governments across the nation have moved to increase taxes on these products. The Indiana General Assembly is now considering legislation imposing several new taxes and regulations on electronic cigarettes. The proposal consists of four main parts. 

First, the bill would require businesses selling e-cigarettes to be licensed, similar to current regulations on tobacco shops. Second, the bill would tax e-cigarettes the same as traditional tobacco cigarettes, by imposing a 24 percent tax on the wholesale price. Third, e-cigarettes would be added to the state’s smoking ban, and e-liquid containers would have to be sold in child-resistant packaging. Finally, the bill would strengthen existing regulations banning the sale of e-cigarettes to minors. 

With nearly 22 percent of its adult population still smoking, Indiana should consider the possible benefits of e-cigarettes for public health. Multiple studies and surveys have shown a substantial number of smokers have switched to this far-safer alternative. Research suggests e-cigarettes are particularly helpful for heavy smokers who have tried and failed to quit through traditional methods such as nicotine gum, the nicotine patch, and medication. 

Some anti-tobacco activists argue vapor products should be subject to smoking bans, but smoking and vaping are two very different activities that deserve separate consideration. The evidence shows the aerosol vapor produced by an e-cigarette is nothing like tobacco smoke. A comprehensive review published in the BMC Public Health Journal by Drexel University Professor Dr. Igor Burstyn reviewed more than 9,000 analyses of e-cigarette liquids and vapor and concluded exposure to e-cigarette vapor poses no health threat poses to bystanders. 

Vapor products should not be taxed as tobacco products. 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. Only one state, Minnesota, follows this policy, subjecting e-cigarettes to a harsh excise tax of 95 percent of the wholesale price. North Carolina, the only other state to tax e-cigarettes, does so at a much lower rate of 5 cents per ml of nicotine-containing liquid. 

Excessive regulations such as those proposed in Indiana harm local small businesses as well. Today’s consumer can easily seek out products from out-of-state Internet retailers if unable to obtain a particular product from a local retailer at a reasonable price. 

Rules on youth access and product safety are appropriate. Indiana’s 2013 ban on the sale of e-cigarettes to minors is one such law. Like many other legal nicotine products, e-cigarettes are not intended for use by minors. Imposing bans on use, undue regulations, and burdensome excise taxes on a product many anti-smoking public health advocates endorse as a way to greatly reduce the toll of smoking is neither sound tax policy nor wise health policy. 

The following articles provide more information about electronic cigarettes and efforts to regulate their sale and use.

Cigarette Taxes and Smoking: Will Higher Taxes Yield a Public Benefit?
http://heartland.org/policy-documents/cigarette-taxes-and-smoking-will-higher-taxes-yield-public-benefit
Kevin Callison and Robert Kaestner of the Cato Institute summarize their study focusing on the effect of recent, large cigarette tax increases on the smoking behavior of adults ages 18–74. The data suggest the association between cigarette taxes and either smoking participation or number of cigarettes smoked is small, negative, and not usually statistically significant. 

Research & Commentary: E-Cigarette ‘Smoking’ Bans
http://heartland.org/policy-documents/research-commentary-e-cigarette-smoking-bans
Many in the public health community say e-cigarettes are far safer than combustible cigarettes while offering many smokers the best option to quit. This Heartland Institute Research & Commentary explains why banning electronic cigarettes in private establishments, like excessive regulation and taxation, is a shortsighted decision that ignores the benefits of e-cigarettes as a nicotine replacement therapy. 

States Look to Tax E-Cigarettes
http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2015/1/23/states-look-to-tax-e-cigarettes
Elaine S. Povich of Pew Charitable Trusts outlines the various proposals states are considering to tax electronic cigarettes. 

Proposed Bill Would Tax, Include E-Cigarettes in Smoking Ban
http://wane.com/2015/01/02/tighter-indiana-rules-being-sought-on-e-cigarettes/
The Associated Press discusses plans for much more regulation of e-cigarettes in Indiana. The state’s attorney general and several lawmakers announced plans to introduce a bill changing the state’s laws on e-cigs in this year’s legislative session. 

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, why are cities banning them? 

Peering Through the Mist: Systematic Review of what the Chemistry of Contaminants in Electronic Cigarettes Tells Us about Health Risks
http://heartland.org/policy-documents/peering-through-mist-systematic-review-what-chemistry-contaminants-electronic-cig-0
Electronic cigarettes are generally recognized as a safer alternative to combusted tobacco products, but there are conflicting claims about how much concern these products warrant regarding e-cigarette users’ health. This paper reviews available data on the chemistry of aerosols and liquids of electronic cigarettes and compares modeled exposure of vapers with occupational safety standards. 

Secondhand Exposure to Vapors From Electronic Cigarettes
http://heartland.org/policy-documents/secondhand-exposure-vapors-electronic-cigarettes
Electronic cigarettes are designed to generate inhalable nicotine aerosol (vapor). When an e-cigarette user takes a puff, the nicotine solution is heated and the vapor is taken into the lungs. Although no side-stream vapor is generated between puffs, some of the mainstream vapor is exhaled by the e-cigarette user. This study evaluated secondhand exposure to nicotine and other tobacco-related toxicants from e-cigarettes. 

Regulating a Less Unhealthy Cigarette
http://heartland.org/policy-documents/regulating-less-unhealthy-cigarette
Michael L. Marlow of the Cato Institute argues the U.S. Food and Drug Administration jeopardizes public health by not developing appropriate benefit-cost analysis of proposed rules. FDA “anticipates,” without quantifying, substantial benefits from reducing harm by regulating e-cigarettes and non-cigarette tobacco products. FDA also does not adequately assess likely costs of its suppression of the e-cigarette market. The evolving literature on e-cigarettes strongly suggests they help smokers quit. 

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 option and reviews the arguments against them. He recommends actions state and local lawmakers should and should not consider regarding tobacco harm reduction and e-cigarettes. 

Testimony to the Baltimore Judiciary and Legislative Investigations Committee
http://heartland.org/policy-documents/testimony-baltimore-judiciary-and-legislative-investigations-committee
Gregory Conley testified before the Baltimore Judiciary and Legislative Investigations Committee on vapor products, concluding e-cigarette bans “have no basis in toxicology and allowing private businesses to make their own choices on the matter is the best policy at the present time. If usage bans are to be enacted, they should recognize the difference between traditional cigarettes and vapor products by, for example, permitting usage in adult-only establishments.” 

Studies Show E-Cigarettes Help Smokers Quit
http://heartland.org/policy-documents/studies-show-e-cigarettes-help-smokers-quit
For years, advocates of smoke-free alternatives, such as electronic cigarettes and other e-vapor products, have known these products help smokers quit or dramatically reduce their cigarette consumption. Gregory Conley examines several studies showing the value of vapor products in smoking cessation. 

The Case Against Smoking Bans
http://www.cato.org/pubs/regulation/regv29n4/v29n4-4.pdf
Thomas A. Lambert, an associate professor at the University of Missouri-Columbia School of Law, argues the market is the best place to make decisions on smoking. He writes, “a laissez-faire approach better accommodates heterogeneous preferences regarding public smoking.” 

 

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 subject, visit Budget & Tax News at http://news.heartland.org/fiscal, The Heartland Institute’s website at http://heartland.org, and PolicyBot, Heartland’s free online research database at www.policybot.org.  

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