On September 12, influential House Democrats circulated a new tax proposal around Washington meant to target the country’s wealthiest individuals and corporations. Much of the focus on the draft, naturally, has been on the potential tax increases for Americans earning more than $435,000 (from 37 to 39.6 percent) as well as large businesses (from 21 to 26.5 percent). These tax hikes, predicted to bring in as much as $2.9 trillion over 10 years, would help President Joe Biden pursue his stated agenda to bolster the social safety net.
This could lead to the country’s richest citizens and most profitable corporations finally paying a fair share—so the government can, say, address the climate crisis and expand public education. But there’s at least one section in the draft that does not fit into this context: a tax raise on all nicotine products.
Smokers, who are widely socially stigmatized, do not typically belong to the upper classes. According to the Centers for Disease Control and Prevention (CDC), current cigarette smoking in the United States “is higher among people with low annual household income than those with higher annual household incomes” and “highest among people with a general education development (GED) certificate and lowest among those with a graduate degree.” They are also more likely to be Indigenous, divorced or widowed, LGBTQ or without health insurance.
Should these blanket tax increases become a reality, relative prices mean that the US government would effectively be leaving an eclectic group of marginalized Americans to die without the practical option of switching to a much safer alternative like vaping. (Biden has repeatedly pledged not to raise taxes for families making less than $400,000 a year.)
Specifically, the proposed tax per 1,000 cigarettes would be jacked up to $100.66—and vaping products would be taxed at this same rate, with 1,000 cigarettes being equal to 1,810 milligrams of nicotine. For example, on the lower end, a 30 milliliter bottle of e-liquid that contains 3 milligrams of nicotine per milliliter (3 mg/mL) would entail a tax rate of $5 for the bottle; on the higher end, a 120 milliliter bottle of e-liquid that contains 6 milligrams of nicotine per milliliter (6 mg/mL) would mean a tax rate of $40 for the bottle.
“A better strategy from a public health perspective would be … to financially incentivize smokers’ use of safer e-cigarettes.”
In comparison, critics and tax reformists have estimated that a four-pack of Juul pods would be taxed around $9—giving a clear advantage to a giant over the smaller player. Far more alarmingly, a pack of cigarettes would only be taxed around $2. Plus, this federal vapor tax would be on top of whatever other vapor taxes a particular state might have. Those, too, often incentivize nicotine users to buy much riskier products. (There are also estimates that smokeless tobacco products, which are also considered much safer than cigarettes, could be taxed up to 1,600 percent more.)
“It makes little sense to increase taxes on the safer product more,” Michael Pesko, a health economist and an associate professor of economics at Georgia State University, told Filter. “A better strategy from a public health perspective would be to raise taxes on cigarettes more and taxes on e-cigarettes less, to financially incentivize smokers’ use of safer e-cigarettes.”
Altogether, the news was yet another blow to a vaping industry that has begun to implode in the past week, as the Food and Drug Administration (FDA)—continuing to review premarket tobacco product applications (PMTAs) that manufacturers had to file last September to keep their products legal—tore flavored e-liquids off the market.
Most, if not all, of the denied applications appear to have come from small- and medium-size manufacturers without the financial resources to complete robust scientific and behavioral studies. Many of the producers who received marketing denial orders (MDOs) have criticized the FDA for not being transparent in the process.
It has been a slow burn: The agency blew past its court-imposed deadline without issuing decisions on larger companies’ products, but announced that it had “taken action” on 93 percent of the submissions over the last few months.
The FDA has still not yet issued any authorizations, which would designate a vaping product as “being appropriate for the protection of public health”—a hazy term that has recently been understood as a particular vape being more likely to help an adult smoker off combustible cigarettes than initiating a teen into nicotine dependence.
Tobacco control experts, producers and consumers have long assumed that government regulations and a burdensome and pricey regulatory bureaucracy would end up favoring larger companies—several of which are owned by, or have financial links to, Big Tobacco. For many in the industry, it’s difficult to imagine crawling out of a hole that appears to get deeper every day.
“The new proposed nicotine tax will finish the job the FDA started when they denied over 90 precent of all vapor products submitted,” Amanda Wheeler, the president of the American Vapor Manufacturers Association, told Filter. “The events that have unfolded in the federal government over the last week signal an all-out war on vapor products and make it a near-certainty that nearly 480,000 Americans will continue to needlessly die every year from smoking.”
If anything, the proposed tax increase is a broad sign that the vaping industry still has a battle ahead of it even when the PMTA process draws to a close. (Whenever that is.) In recent years, Congress members like Senator Dick Durbin and Representative Raja Krishnamoorthi, both Democrats, have introduced legislation—again and again and again—intended to tax cigarettes and e-cigarettes the same. It’s a counterintuitive move, economists have repeatedly pointed out, because combustible cigarettes and e-cigarettes are substitute goods. Prohibitionist groups like the Campaign for Tobacco-Free Kids, predictably, lauded the tax proposal.
“The events that have unfolded in the federal government over the last week signal an all-out war on vapor products.”
In short, tobacco harm reduction advocates argue that vaping products should, at the very least, be taxed far less than cigarettes in order to drive current smokers to safer alternatives. That is, there is a spectrum of nicotine products—everything from nicotine pouches to vapes to menthol cigarettes—and they should be taxed on scale, “differential taxes for differential risks.” In other words, the safer a nicotine product is deemed to be, the less it should be taxed.
“If the goal is to extract more taxes from lower-income Americans who are already multiply disadvantaged, while maintaining higher than necessary mortality and morbidity, this proposal does the job,” David Sweanor, an adjunct professor of law at the University of Ottawa who played a key role in getting tobacco taxation policies adopted globally, told Filter. “If, however, the goal is to empower and encourage people to make healthier personal decisions, they could learn a lot from the experience of ensuring unleaded gas was less expensive than the toxic-leaded variety.”
The nicotine-specific tax legislation, if it reaches Biden’s desk, is projected to raise $96 billion in the next decade or so. But some of these funds would come from making dangerous combustibles way more affordable than far safer vaping products. And all because many lawmakers wrongly seem to perceive cigarettes and e-cigarettes as equally dangerous.
“Between the FDA’s arbitrary decisions on flavored vaping products and the imposition of a huge federal tax on all nicotine-containing products, the Biden administration could deal a death blow to tobacco harm reduction in the United States,” Greg Conley, the president of the American Vaping Association, told Filter.
The Influence Foundation, which operates Filter, has received unrestricted grants and donations from Juul and from the American Vaping Association.