Policy Documents

Research & Commentary: Regulating and Taxing E-Cigarettes in Iowa

November 22, 2013

Electronic cigarettes have quickly become one of the most popular nicotine replacement products; the total market is expected to hit $1.7 billion this year. As e-cigarettes have grown in popularity, state and local governments across the nation have begun efforts to regulate and tax them. 

E-cigarettes have proven to be effective at helping smokers reduce their cigarette use or quit altogether. Adding excise taxes would not only create a new tax burden but also remove a valuable economic incentive for smokers trying to quit. Several studies have found e-cigarettes are an effective and viable option for smokers seeking a satisfying and safer cigarette substitute. The American Association of Public Health Physicians has concluded e-cigarettes could “save the lives of 4 million of the 8 million current adult American smokers.” 

Several states are now considering adding new excise taxes on e-cigarettes in addition to the regular sales tax. Under existing laws, Iowans who smoke conventional cigarettes are charged an excise tax of $1.36 per pack of 20 in addition to the 6 percent state sales tax. Opponents of e-cigarettes argue e-cigarettes, which contain nicotine as conventional cigarettes do, should not be taxed differently from cigarettes. 

Currently, Minnesota is the only state that subjects e-cigarettes to an excise tax, at 95 percent of the wholesale price. Minnesota’s tax strategy equates the use of e-cigarettes to the use of conventional tobacco products; this ignores the fact that e-cigarettes are effective substitutes for conventional cigarettes and significantly reduce risks to users and bystanders. 

In Iowa and most other states, e-cigarettes are subject to state and local sales taxes. Although certain rules pertaining to product quality and safety are appropriate, Iowa legislators should resist preemptively imposing burdensome new taxes and regulations and instead focus on logical first steps such as extending existing age restrictions to e-cigarettes. 

The following articles provide more information about electronic cigarettes and efforts to regulate their sale and use.

Cutting Through the Smoke: Hazy Future for E-Cigarettes in Iowa
http://siouxcityjournal.com/news/state-and-regional/iowa/hazy-future-for-e-cigarettes-in-iowa/article_2d6df474-e82c-5b93-b182-e1cfbac8013d.html

Mike Wiser and Dolly But of the Sioux City Journal discuss the growing e-cigarette market, the currently light regulatory regime, and how the state and federal governments are responding to calls for greater regulation of the product. 

Iowa Attorney General Pushing for Regulation of E-Cigarettes
http://www.kwwl.com/story/23516257/2013/09/24/iowa-attorney-general-pushing-for-regulation-of-e-cigarettes
Eric Page reports on Iowa Attorney General Tom Miller’s recent cosigning of a letter to the U.S. Food and Drug Administration urging the agency to prohibit the sale of electronic cigarettes to minors and restrict their ingredients and advertising.

E-cigarette Regulation: Take Sensible Approach to Help Smokers Quit
http://news.heartland.org/editorial/2013/08/19/e-cigarette-regulation-take-sensible-approach-help-smokers-quit
Writing for the Heartlander, Jeff Stier, a senior fellow at the National Center for Public Policy Research, notes e-cigarettes provide immediate and long-term health benefits. He argues any regulation should be careful not to hinder use of e-cigarettes by those seeking to quit smoking cigarettes. 

Regulating, Taxing E-Cigarettes
http://rodutobaccotruth.blogspot.com/2013/05/regulating-taxing-e-cigarettes.html
Heartland Institute Senior Fellow Brad Rodu argues new taxes on e-cigarettes are likely and makes suggestions on how states should implement these taxes. 

A Fresh Look at Tobacco Harm Reduction: The Case for the Electronic Cigarette
http://heartland.org/policy-documents/fresh-look-tobacco-harm-reduction-case-electronic-cigarette
Riccardo Polosa, Brad Rodu, Pasquale Caponnetto, Marilena Maglia, and Cirino Raciti identify the health effects of e-cigarette use and consider the acceptability, safety, and effectiveness of this product as a long-term substitute for smoking.

Will Taxes and Regulation Rein In the Booming E-Cigarette Market?
http://www.forbes.com/sites/danielfisher/2013/10/02/will-taxes-and-regulation-rein-in-the-booming-e-cigarette-market/
Daniel Fisher of Forbes discusses the effect both new regulations and taxes will have on the emerging e-cigarette market. Fisher speaks with several sources on both sides of the debate.

Research & Commentary: Electronic Cigarettes
http://heartland.org/policy-documents/research-commentary-electronic-cigarettes\
In this Research & Commentary, Heartland Institute Senior Policy Analyst Matthew Glans examines electronic cigarettes, tobacco harm reduction, and various proposals to regulate e-cigarette use. E-cigarettes have quickly become one of the most popular nicotine replacement products and a key building block in tobacco harm reduction strategies. 

Research & Commentary: Age Restrictions for Electronic Cigarettes
https://heartland.org/policy-documents/research-commentary-age-restrictions-electronic-cigarettes
Matthew Glans of The Heartland Institute outlines the debate on how to regulate electronic cigarettes and describes efforts to regulate their sale to and use by minors.

Electronic Cigarettes at a Regulatory Crossroads
http://heartland.org/policy-documents/electronic-cigarettes-regulatory-crossroads
Writing for Regulation magazine, Thomas Hemphill outlines the various regulatory paths the state and federal governments may take in their efforts to regulate e-cigarettes. 

Tobacco and Tobacco Products at a Crossroads in the 21st Century
http://heartland.org/policy-documents/tobacco-and-tobacco-products-crossroads-21st-century
Tobacco and health policy consultant Scott D. Ballin outlines several considerations he says must be part of the debate if further improvement in harm reduction is to continue. 

The Clueless Crusade to Ban E-Cigarettes
http://reason.com/archives/2013/08/28/the-clueless-crusade-to-ban-e-cigarettes#comment
Writing for the Reason Foundation, Nick Gillespie discusses the effort to ban e-cigarettes and the motivation behind such bans. 

Electronic Cigarettes Are the Tobacco Harm Reduction Phenomenon of the Year—But Will They Survive?
http://heartland.org/policy-documents/electronic-cigarettes-are-tobacco-harm-reduction-phenomenon-year-will-they-survive
Paul L. Bergen and Courtney E. Heffernan offer a brief history of the e-cigarette and discuss the merits and limitations of e-cigarettes in tobacco harm reduction. 

The Electronic Future of Cigarettes
http://www.theatlantic.com/health/archive/2013/06/the-electronic-future-of-cigarettes/277057/
In this article in The Atlantic, Brad Rodu examines the effectiveness of e-cigarettes as a method of nicotine harm reduction and criticizes the efforts of opponents and regulators to hinder the companies that produce them: “The body of highly credible research and roster of public health experts endorsing tobacco harm reduction continues to grow, providing more science-based support for smokers to switch. In the absence of rational FDA regulation, nicotine-addicted smokers would do well to quit cigarettes and avail themselves of the many smoke-free harm reduction products that are currently on the market.”

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. For further information on this and other topics, visit The Heartland Institute’s Web site at http://heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org

If you have any questions about this issue or The Heartland Institute, contact Heartland Legislative Specialist Matthew Glans at 312/377-4000 or mglans@heartland.org.