Testimony before the Hawaii Senate Committees on Health & Human Services and Consumer Protection & Commerce Regarding the Taxation of Electronic Cigarettes

Chairmen Buenaventura and Keohokalole, Vice Chairs, and Members of the Committee:

Thank you for your time today to discuss imposing an excise tax on electronic cigarettes or vapor products in Hawaii. My name is Lindsey Stroud and I’m Director of the Consumer Center at the Taxpayers Protection Alliance (TPA). TPA is a non-profit, non-partisan organization dedicated to educating the public through the research, analysis and dissemination of information on the government’s effects on the economy. TPA’s Consumer Center focuses on providing up-to-date information on adult access to goods including alcohol, tobacco and vapor products, as well as regulatory policies that affect adult access to other consumer products, including harm reduction, technology, innovation, antitrust and privacy.

While addressing youth use of age-restricted products is laudable, lawmakers must refrain from imposing excise taxes on alternatives to the most dangerous form of tobacco, combustible cigarettes. E-cigarettes are significantly less harmful and their use should be encouraged, not taxed. An excise tax will only deter their use among adults who are unable and/or unwilling to quit smoking.

Key Points

• Youth vaping has decreased by 53 percent between 2019 and 2022, while youth use of traditional tobacco products is at record lows.
• In 2022, among middle and high school students that had used a tobacco or vape product on at least one occasion in the 30 days prior, 9.4 percent reported using e-cigarettes, 1.9 percent had used cigars, 1.6 percent has used combustible cigarettes and 1.3 percent had used smokeless tobacco products.
• Taxes on vapor products disproportionately harm lower income persons.
• Among adults earning $15,000 or less, 7.9 percent reported current e-cigarette use in 2021, compared to 4.8 percent who reported earning $50,000 or more.
• The introduction of e-cigarettes has not led to increases in cigarette smoking, but rather, correlates with significant declines in smoking rates among young adults.
• Between 2007 and 2018, smoking rates among Hawaii adults aged 18 to 24 years old declined by 39.6 percent. Since 2018, young adult smoking rates have decreased another 47.3 percent, with average annual declines of 16.8 percent.
• Hawaii woefully underfunds programs to prevent youth use of tobacco and/or vapor products and help adults quit smoking, while simultaneously receiving millions of dollars from the pockets of the adults who do smoke. In 2021, for every $1 the state received in tobacco monies, it spent only $0.06 on tobacco control efforts.

Youth Tobacco and Vapor Product Use

Despite headlines, youth use of traditional tobacco products is at record lows. While youth e-cigarette use peaked in 2019, it has steadily declined in the years since.

In 2022, according to the National Youth Tobacco Survey (NYTS), among middle and high school students that had reported current tobacco product use (defined as having used the product on at least one occasion in the 30 days prior), 1.9 percent had used cigars, 1.6 percent had used combustible cigarettes and 1.3 percent had used smokeless tobacco products.[1] These are some of the lowest levels recorded. In fact, in the 10 years between 2012 and 2022, current cigar use declined by 75.3 percent, cigarette use by 81.7 percent and smokeless tobacco use by 67.9 percent. These declines have come all the while flavored tobacco and vapor products remain available for sale.

Regarding vaping use (according to the NYTS), vaping seems to have peaked in 2019 when 20 percent of middle and high school students had used an e-cigarette in the 30 days prior to the survey. In 2022, only 9.4 percent of U.S. youth were currently vaping, a 53 percent decrease from 2019’s levels.

Other national survey data has found significant declines in youth use of tobacco and vapor products. In 2022, according to the Monitoring the Future Survey (MTFS), among middle and high school students, 2.3 percent reported currently using smokeless tobacco, 2.2 percent reported current combustible cigarette use, and 1.4 percent reported using flavored little cigars.[2] Again, these are some of the lowest levels recorded. In 2012, more than one in ten U.S. youth (11 percent) reported current cigarette use. In ten years, smoking rates among U.S. youth declined by 78.7 percent. During the same period smokeless tobacco use among youth decreased by 59.6 percent. Between 2014 and 2022, the percent of youth reporting current use of flavored cigars declined by 81.2 percent.

Similar to the NYTS, the MTFS also found that youth vaping peaked in 2019, when 22.7 percent of U.S. youth reported “any vaping” – i.e., using a vapor product to vape either nicotine or other substances.  Between 2019 and 2022, the percent of youths reporting any vaping decreased by 23.9 percent.

The CDC continues to delay publishing state-specific data from the 2021 Youth Risk Behavior Survey. However, nationally, only 18 percent of high school students reported using vapor products in the 30 days prior to the survey in 2021. This is a 45 percent decrease from 2019 when 32.7 percent of high schoolers reported current vapor product use.

As the YRBS is an aggregate of all state data, Hawaiian lawmakers should refrain from excessive taxes to address outdated figures on youth vapor product use in the state.

Adult Tobacco and Vape Use

In 2021, 10.1 percent of adults in Hawaii were currently using cigarettes.^[3] Smoking rates were highest among 45- to 64-year-old adults, with 12.1 percent reporting current use.

Among all adults earning $25,000 annually or less in 2021, more than one fifth (21.2 percent) reported currently smoking, compared to only 7.3 percent of adults who earned $50,000 or more per year.

The CDC provides data on adult e-cigarette use for only 2016, 2017, and 2021.

In 2021, among all Hawaii adults, 7.3 percent were currently using e-cigarettes. This is a 55.3 percent increase from 2017 when 4.7 percent of Hawaiian adults were current e-cigarette users.

In 2021, among all Hawaii adults, 24.5 percent of 18- to 24-year-olds, 11.2 percent of 25–44-year-olds, 2.4 percent of 55–64-year-olds, and 0.7 percent of adults aged 65 years or older were currently using e-cigarettes.

Among adults earning $15,000 or less, 7.9 percent reported current e-cigarette use, compared to 4.8 percent who reported earning $50,000 or more.

In Hawaii, 10.7 percent of Multiracial, non-Hispanic adults, 10.5 percent of Native Hawaiian and/or Pacific Islander adults, 10.2 percent of Hispanic adults, 7.4 percent of Black adults, 6.1 percent of White adults, and 5.1 percent of Asian adults were currently using e-cigarettes in 2021.

Effects Of Cigarette Taxes

Hawaii last increased its state cigarette excise tax in 2011 from $3.00 to $3.20-per-pack. Lawmakers often justify excise taxes on cigarettes to deter persons from using combustible cigarettes, yet, such taxes disproportionately harm lower income, lower educated adults, as well as fail to significantly reduce smoking rates among those persons.

The number of percent of Hawaii adults earning $25,000 or less that were smoking decreased by 30.3 percent between 2011 and 2021, while the percent of adults earning $50,000 or more that were smoking decreased by 36 percent during the same period. Among Hawaiians who did not graduate high school, smoking rates decreased by 38.1 percent, yet rates among adults with a college degree decreased by 42.6 percent.

Lawmakers should refrain from enacting further increases in cigarette taxes given their disproportionate effect on low-income persons, while failing to reduce smoking rates.

Tobacco Monies

Each year, states receive millions of dollars borne out of the lungs of persons who smoke. This revenue includes excise cigarette taxes and settlement payments. Yet, each year, states spend miniscule amounts of tobacco-related monies on programs to help adults quit smoking and prevent youth use.

In 2021, the Aloha State collected nearly $98.1 million in state excise tax revenue from combustible cigarettes.[4] This was a 4.2 percent decline from 2020’s $102.4 million. Between 2001 and 2021, Hawaii collected more than $2.1 billion in cigarette taxes.

Since 2000, Hawaii has collected annual payments from tobacco manufacturers based on the percentage of cigarettes and tobacco products sold in the state in that year. Hawaii collected $37.5 million in settlement payments in 2021, a 6.2 percent increase from 2020’s $35.3 million.[5] Since 2000, the Aloha State collected nearly $997 million in tobacco settlement payments.

While Hawaii collected an estimated $135.6 million in tobacco-related monies in 2021, the state allocated only $7.9 million in state funding towards tobacco control programs, including cessation, education, and youth prevention efforts, which was a 23.4 percent increase in funding from 2020 levels.[6] This amounts to 8.1 percent of taxes and 21.1 percent of settlement payments. In 2021, for every $1 the state received in tobacco monies, it spent only $0.06 on tobacco control efforts.

Conclusion

Lawmakers must refrain from taxing products that are less harmful than combustible cigarettes and have actively contributed to significant declines in traditional tobacco smoking rates, especially among young adults. Given the significant reductions in youth use of e-cigarettes, as well as the record lows in use of traditional tobacco products, excise taxes on vapor products are not necessary. Rather, policymakers should use more of the already-existing monies derived from cigarettes to prevent youth use and help adults quit.

[1] Eunice Park-Lee, et al., “Tobacco Product Use Among Middle and High School Students — United States, 2022,” Morbidity & Mortality Weekly Report, Centers for Disease Control and Prevention, November 11, 2022, https://www.cdc.gov/mmwr/volumes/71/wr/mm7145a1.htm?s_cid=mm7145a1_w.

[2] University of Michigan, “1975-2022 Data for In-School Surveys of 8th, 10th, and 12th Grade Students,” Monitoring the Future, 2022, https://monitoringthefuture.org/results/data-products/tables-and-figures/.

[3] Centers for Disease Control and Prevention, “Behavioral Risk Factor Surveillance System,” 2022, https://www.cdc.gov/brfss/brfssprevalence/. Accessed December 2022.

[4] Orzechowski and Walker, “The Tax Burden on Tobacco Historical Compilation Volume 56, 2021. Print.

[5] Campaign for Tobacco Free Kids, “Actual Annual Tobacco Settlement Payments Received by the States, 1998-2022,” December 20, 2022, https://www.tobaccofreekids.org/assets/factsheets/0365.pdf.

[6] Campaign for Tobacco-Free Kids, “Appendix A: History of Spending for State Tobacco Prevention Programs,” 2022, https://www.tobaccofreekids.org/assets/content/what_we_do/state_local_issues/settlement/FY2023/Appendix-A.pdf.