Illinois lawmakers, desperate for revenue, are considering taxing electronic cigarettes and vaping devices. Senate Bill 1124 would amend the Tobacco Product Tax Act of 1995 to include e-cigarettes in the definition of tobacco products.

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The proposal would apply a 36 percent wholesale tax to all components of e-cigarettes, including “any device that employs a battery or other mechanism to heat a solution or substance to produce a vapor or aerosol intended for inhalation.” The bill would also tax all e-liquids, “whether or not it contains nicotine intended for use in the device.”

 

Gov. J.B. Pritzker is a proponent of the tax, hoping to use the funds “to balance his budget proposal.” However, lawmakers should refrain from taxing tobacco harm reduction devices such as e-cigarettes because these products are 95 percent safer than combustible cigarettes. Moreover, e-cigarettes and vaping devices are effective cessation tools that can help reduce the burden placed on states’ budgets by lessening smoking-related health care costs.

 

E-cigarettes are undoubtedly safer than combustible tobacco cigarettes. In 2015, Public Health England (PHE), a leading health agency in the United Kingdom similar to the U.S. Food and Drug Administration, found e-cigarettes are 95 percent safer than smoking. In 2018, PHE reiterated this claim, finding “vaping is at least 95% safer than smoking.” Other public health groups, including the Royal College of Physicians, National Academies of Sciences, Engineering, and Medicine, and the American Cancer Society have also acknowledged the reduced harm of e-cigarettes.

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Approximately three million Americans have used e-cigarettes to quit smoking. A 2019 study in The New England Journal of Medicine found electronic cigarettes are “twice as effective as nicotine replacement [therapy] in helping smokers quit.”

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Moreover, there is substantial evidence the use of vaping products can help states save money by reducing smoking-related health care costs. One study estimated that if all Medicaid recipients who smoke had switched to e-cigarettes, state Medicaid programs would have saved $48 billion in 2012. Another analysis used a “sample size of 1% of smokers [within] demographic groups permanently” switching. In this analysis, Medicaid savings were estimated to “be approximately $2.8 billion per 1 percent of enrollees” over the next 25 years.

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Perhaps the most significant problem with the proposal is lawmakers aim to tax products that have helped smokers quit, yet they currently spend less than 1 percent of tobacco revenue on cessation and prevention efforts. In 2018, Illinois received an estimated “$1.129 billion in tobacco settlement payments and taxes,” but it spent only “7.3 million in state funds to tobacco prevention.”

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The imposition of a tax on vaping products could also have negative fiscal results. In 2016, Pennsylvania passed a 40 percent wholesale floor tax on vaping devices. Within a year of the new tax, approximately 120 vape shops closed in the commonwealth. Ultimately, states lose revenue with these taxes because vape shops “generate annual non-online sales of more than $300,000 per store.”

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Rather than imposing draconian taxes that would vaporize tobacco harm reduction efforts, Illinois lawmakers should embrace the use of e-cigarettes and vaping devices. Despite fearmongering, these products have proven to be effective cessation devices. They are drastically less harmful than combustible tobacco cigarettes, and they provide a boon to state and local economies.

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Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute or Tobacco Harm Reduction 101.