TPA urges passage of Georgia H.B. 877, a win for innovation and lower taxes

David Williams

February 28, 2018

On February 14, 2018, Taxpayers Protection Alliance (TPA) President David Williams testified before the Georgia House Ways and Means Committee to urge lawmakers to support H.B. 877, which would significantly lower taxes on modified risk tobacco products that are authorized by the Food and Drug Administration (FDA).  As the full Georgia House of Representatives prepares to vote on H.B. 877, TPA reiterates its support of the legislation.

In confronting problems associated with tobacco usage, Georgia walks a fine line. Smoking related-illnesses not only inflict a terrible human toll, but also wreak havoc on the state’s healthcare budget. At the same time, tobacco farming is a $54 million industry in the state and employs thousands of people. How can Georgia safeguard the long-term health of its residents without ruining the livelihoods of farmers across the state?

Fortunately, innovative snus and heat-not-burn tobacco products are under consideration by the FDA to sell them as modified risk tobacco products. This framework has recently been embraced by FDA as a way to switch smokers to less harmful alternatives by providing businesses with incentives to develop innovative products and acknowledging there is a continuum of risk when it comes to tobacco products. Smoking cigarettes is by far the most harmful way to consume nicotine. Manufacturers of innovative products already have to provide scientific information to FDA, many spending billions of dollars, to convince regulators that their products provide a safe alternative to conventional cigarettes. But even if the FDA allows these innovative products to be sold and marketed in states such as Georgia, they would still be taxed at the same rate as more harmful tobacco products, which could deter Georgia residents from purchasing them. If we tax these products at a lower rate, it will provide consumers with even more of an incentive to switch to less harmful products. 

Take snus as an example, there’s no justification to treat these products the same as cigarettes. In countries like Norway and Sweden, the popularity of snus coincides with some of the lowest rates of lung cancer in Europe. That shouldn’t come as much of a surprise, since medical experts agree that snus is less harmful than other forms of smokeless tobacco and far less harmful than smoking cigarettes. 

Similar reasoning should apply to heat-not-burn tobacco products. Buying a heat stick that contains tobacco for use in a heat-not-burn product would be subject to that same 37-cent tax rate, despite overwhelming evidence that heat-not-burn products are far safer than conventional cigarettes. An analysis by Dr. Reto Auer at the University of Bern in Switzerland found that a puff of heat-not-burn contains a tiny of fraction of the carcinogens of a regular cigarette. And, just last week, Public Health England (the HHS of England) concluded that heat not burn products are likely much less harmful than conventional cigarettes. Smokers switching to these products would mean far fewer taxpayer-funded hospital stays and cancer screenings over the long-term. Despite this, heated tobacco products are treated the exact same in the eyes of the tax authorities.

In assessing these new products, it is FDA’s mandate to make sure that products that say reduce exposure, harm or risk actually do so. If authorized by FDA as a modified risk product, there’s simply no reason for Georgia to tax these products like traditional products. Innovative products like snus and heat-not-burn can provide an important exit ramp off of cigarettes. Governments can save millions of lives by reducing tax rates on modified risk tobacco products and companies should be incentivized to develop reduced harm alternatives to smoking. 

Georgia has an opportunity to be a leader in encouraging people to switch. TPA urges the Gerogia House of Representatives to pass H.B. 877 and make sure that current and future Georgians have affordable access to modified risk tobacco products.