A tax on public health

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Article Highlights

  • Taxing e-cigarettes like their cancer-causing alternative, traditional tobacco, is absurd.

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  • The evidence to date tells us that e-cigarettes are safe when compared to conventional cigarettes.

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  • States may be pursuing this tax because revenue from taxing traditional cigarettes has been declining.

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  • But that’s no excuse for taxing a product that can help people quit smoking, improve health outcomes and ultimately save lives.

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Last week, the Food and Drug Administration issued a proposal to regulate electronic cigarettes as a tobacco product. While public health and industry experts debate this much-anticipated regulation, a handful of Senate Democrats are quietly promoting the pernicious idea of extending tobacco taxes to e-cigarettes. Taxing e-cigarettes would threaten public health by penalizing a product that holds the promise of luring people away from the traditional cigarettes that have caused so much death and disease.

Sens. Tom Harkin, D-Iowa, Dick Durbin, D-Ill., Richard Blumenthal, D-Conn., Jack Reed, D-R.I., Sheldon Whitehouse, D-R.I., and Jay Rockefeller, D-W.V., have each introduced or co-sponsored one or more bills that, if enacted, would extend federal tobacco taxes to e-cigarettes once the FDA finalizes its proposal. Taxing e-cigarettes like their cancer-causing alternative, traditional tobacco, is absurd. The evidence to date tells us that e-cigarettes are safe when compared to conventional cigarettes.

Because no tobacco leaves are combusted, there are no carcinogenic tars and gases in e-cigarettes. Instead, a heating element converts a liquid solution of nicotine into an aerosol that users inhale as a vapor. Surveys show that users are predominantly former heavy smokers who switched completely or cut down on smoking. Many of them turned to e-cigarettes after failing to get results with nicotine gum or patches. Of course, e-cigarettes do provide nicotine, but the health effects of nicotine are generally benign. And the other ingredients in e-cigarettes – propylene glycol and glycerin, as well as nitrosamines, cadmium, lead and nickel in small amounts – are either generally accepted as safe or are present in such low levels as to likely be harmless.

Imposing a federal excise tax on a product that has health benefits may sound impossible, but it’s not. In fact, lawmakers recently did just that. The Affordable Care Act imposes excise taxes on brand pharmaceuticals and medical devices. The Affordable Care Act even imposes an excise tax on health insurance coverage, the very thing the law seeks to promote. These taxes seem to have been adopted simply to provide the additional revenue needed to cover the cost of other provisions of the bill.

Also, many states are moving toward taxing e-cigarettes. Minnesota already imposes tobacco taxes on e-cigarettes and similar proposals have emerged in Hawaii, Indiana, Kentucky, Massachusetts, New Jersey, Ohio, Oklahoma, Rhode Island, South Carolina, Utah, Washington and Wisconsin. States may be pursuing this tax because revenue from taxing traditional cigarettes has been declining. As with the federal taxes on pharmaceutical and medical devices, it’s all about needing the money.

But that’s no excuse for taxing a product that can help people quit smoking, improve health outcomes and ultimately save lives. Any e-cigarette tax would raise the price of e-cigarettes for consumers, discouraging smokers from switching away from cigarettes. Governments have plenty of more efficient, and less regressive, tax policies to consider if they need more revenue. Budgetary concerns can’t justify adopting a tax that would undermine public health objectives.

At a hearing last December before the New York City Council’s health committee, the Campaign for Tobacco-Free Kids pushed for treating e-cigarettes like cigarettes by arguing, "If it walks like a duck and it talks like a duck and it sounds like a duck and it looks like a duck, it is a duck." That’s a nonsensical argument for setting tax policy. The reason we tax cigarettes is not because of the way they look – it’s because they kill people. E-cigarettes may look like cigarettes, but they don’t kill like cigarettes. If we care about public health, we shouldn’t tax them like cigarettes. 

Alex Brill is a research fellow at the American Enterprise Institute. Alan D. Viard is a resident scholar at the American Enterprise Institute.

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