States Continue to Target Tobacco, and now, Vapor Industry for Taxes

July 1^st marks the beginning of the fiscal year for states across the country, and with that comes the end for many legislative sessions where budgets have been completed and difficult choices on spending have been made. Unfortunately, many states have defaulted to the tired and repeated mistake of taxing tobacco products and some legislatures are even looking to go after those who partake in vaping with new taxes on what is a growing industry, the last thing it needs is excise taxes to harm that potential.

This is sadly a bipartisan affair, as states run by Democrats and Republicans are getting in on the haphazardly scheme of taxing tobacco and vapor products. Here are some of the states that have done a disservice to the taxpayers that put them in office by enacting these misguided policies that do more harm than good:

Cigarette tax increases effective July, 1 2015:

• Kansas: 50 cents, for a total of $1.29/pack
• Louisiana: 50 cents, for a total of 86 cents/pack
• Minnesota: 7 cents, for a total of $2.90/pack
• Nevada: $1.00, for a total of $1.80/pack
• Vermont: 33 cents, for a total of $3.08/pack

Unfortunately, Ohio is likely to be added to the list, as a 35 cent increase made it out of the budget conference this week and is likely going to be signed by Republican Governor John Kasich very soon.

These numbers only tell part of the story because overall in 2015, 26 states have attempted to move on tobacco taxes this year. 11 of those bills were either rejected or saw no action in Georgia, Hawaii, Kentucky, Maryland, Mississippi, New Hampshire, North Dakota, Utah, Virginia, West Virginia and Wyoming.

Looking now to vapor products, a similar narrative has taken place in terms of the nasty habit of states thinking taxes are the answer. In 2015, 22 states and the District of Columbia put forth legislation that would levy excise taxes on vaping but in various states the method, type, and amount of the vaping tax have differed.

• Kansas: effective July 2016, E-cig ‘juice’ will be taxed 20 cents/milliliter
• Louisiana: imposes a tax on vapor products of $.05 per milliliter

Some states are still working, and taxing vapor products is a part of that work. Washington State is looking to enact “a new 60 percent tax on the wholesale cost of e-cigarettes and vapor products sold.” Washington D.C. Mayor Muriel Bowser proposed a 70 percent tax on e-cigarettes. The threat of new taxes on e-cigarettes is real and growing; and there will be more legislative sessions in the future that will have the vaping industry in their sights for tax increases.

These aggressive attempts at taxing vapor products are important because it was just recently shown how much the industry is growing in the United States. Just a few weeks ago, Reuters released the results of a poll that measured the increase in e-cigarettes:

About 10 percent of U.S. adults now vape, according to the online Reuters/Ipsos poll of 5,679 Americans conducted between May 19 and June 4. That’s almost four times higher than a U.S. government estimate that 2.6 percent of adults used e-cigarettes in 2013.

Right now, the average tax on a pack of cigarettes runs at about $1.58/pack, but the truth is that these types of tax increases are flat out failures, and the revenues envisioned by those pushing for those tax increases become Fool’s Gold. Now state legislatures want to bring that mindset to the growing industry of vaping, harming the potential for growth and likely deterring consumers away from an alternative choice to tobacco. What is more problematic is that when the increased taxes don’t raise the projected revenue, elected officials will be tempted have to go after revenue (taxpayers) in other ways to make up that lost money. These types of tax increases also lead to higher black market activity in those states. Applying the same logic to vapor products is nonsense.

The Taxpayers Protection Alliance (TPA) will continue to highlight the problems with these types of tax increases and will call out states, governors, and legislatures when they engage in policies that harm their state and taxpayers with redundant policies that discourage small business and disproportionately hit the middle class.