Federal Bill Aims to Tax Vapes as Much as Cigarettes

    On April 22, high-ranking Democratic legislators introduced a bicameral bill that would create the country’s first federal vaping tax.

    Senate Majority Whip Dick Durbin—perhaps the most prominent longtime anti-smoking advocate in Congress—joined forces with Representative Raja Krishnamoorthi, who over the past few years has become one of the vaping industry’s fiercest opponents. The Tobacco Tax Equity Act of 2021 was also sponsored by several other Democrats, including Senate Finance Committee Chair Ron Wyden. Major public health and tobacco control groups like the Campaign for Tobacco-Free Kids (CTFK), the American Heart Association and the American Cancer Society Cancer Action Network have endorsed it as well.

    If the bill manages to survive the congressional chambers and make it onto President Joe Biden’s desk for signing, it would increase the tobacco tax rate—and place the same tax rate on reduced-risk alternatives like vapes.

    Tobacco harm reduction experts and vaping consumer activists swiftly condemned the plan, accusing these elected officials of failing to grasp simple economics. E-cigarettes and cigarettes are substitute goods; if they’re taxed at the same rate, smokers will be disincentivized from switching from combustibles to safer electronic nicotine delivery systems (ENDS). It might actually have the opposite, adverse effect: It could push smokers back to cigarettes, which would likely be more affordable under the current proposal.

    “Congress should differentially tax tobacco products to incentivize smokers to quit smoking—or switch to much less harmful products.”

    “The effort to tax all tobacco products at parity is based on the faulty premise that all non-medicinal nicotine-containing products are equally harmful, which is flat wrong,” Cliff Douglas, director of the University of Michigan Tobacco Research Network and former vice president of tobacco control for the American Cancer Society, told Filter.

    “Based on the science and public health concerns, Congress should differentially tax tobacco products to incentivize smokers to quit smoking—and for those who can’t or won’t stop using nicotine to switch to much less harmful products.”

    This isn’t a new idea. And as a rising number of states push vape taxes of their own, the criticism has been levied over and over again.

    In 2015, tobacco economics experts Frank Chaloupka, Ken Warner and David Sweanor published a New England Journal of Medicine study calling for “an approach that differentially taxes nicotine products in order to maximize incentives for tobacco users to switch from the most harmful products to the least harmful ones.”

    They pointed to Sweden, the European country with the lowest tobacco-associated mortality rates among men. Sweden has lower taxes on snus, a smokeless tobacco product less dangerous than cigarettes. The policy has been credited with helping male smokers quit by financially encouraging them to transition to the safer and less expensive option. (Female smokers didn’t “switch to the same extent, which illustrates that price differentials alone are not always sufficient to achieve public health goals.”)

    This strategy has not been embraced in the United States, where prohibition-minded lawmakers, lobbyists, philanthropists and organizations operate a piecemeal tobacco control agenda that ignores harm reduction in favor of a myopic focus on the youth vaping “epidemic,” despite the fact that youth vaping rates are falling.

    The typical argument from groups like CTFK is that vaping products have not yet been approved by the Food and Drug Administration (FDA). The agency is expected to approve or deny premarket tobacco product applications that vaping companies had to file by the fall of 2021. (CTFK did not respond to Filter’s request for comment by publication time.)

    “It’s telling that a publication in what is generally seen as the most prestigious medical journal in the country, written by long-standing public health leaders in the field of the economics of tobacco, has been consistently ignored by CTFK in its pursuit of an abstinence-only agenda,” Sweanor told Filter. “It’s not been refuted, and there has been no willingness for discussion. It’s merely been ignored.”

    Michael Pesko, a health economist and associate professor at Georgia State University, has also cited his own research funded by the National Institutes of Health (NIH). He found that for every vape pod eliminated from the market because of an e-cigarette tax, more than seven packs of cigarettes are smoked instead. 

    Stock market observers have identified this inevitable scenario as well. In a note to investors reviewed by Filter, analysts at Barclays, a banking and financial services company, wrote that “equalizing federal excise tax on e-cigs (currently 0) to cigs ($2.02/pack) would likely lead to 40-50 percent increase in e-cig prices, much more than cigs. Coming at the same time as the FDA tightens its e-cig regulation through the PMTA process, this implies continued declines in e-cigs, which could benefit cig [volumes].”

    As Jim McDonald noted on Vaping360, Durbin has introduced numerous tobacco tax equity acts in the past that have not been realized. And this one is also similar in scope to the Mothers and Offspring Mortality and Morbidity Awareness Act (MOMMA), also introduced by Durbin earlier this year, which aims to set new excise taxes on tobacco products.

    Durbin, however, might actually have an advantage this time. Democrats now control both Congressional houses as well as the presidency—and many politicians, including some Republicans, tend to view all nicotine products as interchangeable. In recent weeks, the Biden administration has signaled it will pursue an aggressive tobacco control agenda, igniting a fresh debate on banning menthol cigarettes and weighing a policy that would require tobacco companies to lower the nicotine levels in cigarettes.

    “If governments impose excessive taxes, ban flavors, stop the use of mail and force the producers to jump over massive bureaucratic hurdles, don’t be surprised if more vapers go back to smoking and more smokers don’t switch,” Clive Bates, a former director of the United Kingdom’s Action on Smoking and Health, told Filter. “What else are these tobacco control groups expecting? Either they don’t understand this basic idea, or worse, they just don’t care.”



    Photograph by Lindsay Fox via Flickr/Creative Commons 2.0

    • Alex was formerly Filter’s news editor. He previously worked as a reporter and copy editor at VICE, and has been published in the New York Times Magazine, the Columbia Journalism Review, the Los Angeles Times and the New Republic, among other outlets. He was also previously a freelance editorial consultant for the Foundation for a Smoke-Free World; The Influence Foundation, which operates Filter, has received grants from the Foundation for a Smoke-Free World. He is currently based in Los Angeles.

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