Due to a budget impasse, Vermont legislators are in a special session, which is costing taxpayers in the Green Mountain State an estimated $60,000 per day. As lawmakers scramble to allocate state funding mechanisms, one proposal will significantly impact cigarette smokers who are trying to quit.

 

The proposal would impose a 46 percent wholesale tax on the liquid (e-liquid) used in electronic cigarettes or vaping devices, including e-liquids containing zero nicotine. The revenue will not be dedicated to the State Health Care Resources Fund, as tobacco and other excise taxes in earlier years have been, rather the funds will be placed in the General Fund in fiscal year 2019. This is to “to offset any revenue impact” stemming from other provisions in the legislation, including changes in “first time homebuyer program, the downtown and village center tax credit, and the taxable meal exclusions.”

 

Opponents of tax increases on tobacco harm reduction (THR) products such as smokeless tobacco, e-cigarettes and vaping devices, and heat-not-burn products, note these are counterproductive and offset the public health gains these products offer to combustible cigarette smokers. Moreover, ample research indicates that electronic cigarettes are significantly less harmful than tobacco cigarettes and are an important tool to helping smokers quit.

 

Public health organizations have spent the past several years researching the role of e-cigarettes and vaping devices. In 2016, the Royal College of Physicians said that e-cigarette use “is unlikely to exceed 5% of the harm from smoking tobacco,” concluding that it is “in the interests of public health … to promote the use of e-cigarettes.” In a November 2016 briefing, Cancer Research UK noted that current evidence indicates e-cigarettes are less hazardous than tobacco cigarettes and that “it is important that regulation does not stifle [their] development.”

 

In January 2018, the National Academies of Sciences, Engineering and Medicine concluded that e-cigarette use resulted in “reduced short-term adverse health outcomes in several organs and the American Cancer Society (ACS) acknowledged that “the exclusive use of e-cigarettes is preferable to continuing to smoke combustible cigarettes.”

 

Another problem is that this tax will negatively impact Vermont’s vaping industry. Since Pennsylvania passed a similar tax in 2016 an estimated 120 vaping businesses have closed. Research analyzing retail markets estimates that vape shops “generate annual non-online sales of more than $300,000 per store,” and average $26,000 in monthly sales. Should Vermont impose a 46 percent floor tax on e-liquids, vape shops will be forced to shut their doors and consumers will be forced to look elsewhere, including online and neighboring states, for their vaping or e-cigarette needs.

 

Lawmakers ought to promote e-cigarettes and vaping because these products could save states billions. In a 2017 policy study by R Street, Associate Fellow Richard B. Belzer examined the financial impact to Medicaid costs, should a number of current Medicaid recipients switch from combustible cigarettes to electronic cigarettes and vaping devices. Belzer used a sample size of “1% of smokers [within] demographic groups permanently” switching. Using this analysis, Belzer estimates that Medicaid savings “will be approximately $2.8 billion per 1 percent of enrollees,” over the next 25 years.

 

Rather than imposing draconian taxes on products that have aided thousands of smokers with quitting combustible tobacco cigarettes, Vermont lawmakers should promote the use of electronic cigarettes and vaping devices. Evidence continues to mount that these products are safer than tobacco cigarettes and should be treated as such.

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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.