Research & Commentary: New Jersey Should Eliminate Its Draconian Vaping Tax

Published September 20, 2018

In July 2018, New Jersey approved a measure imposing a tax on “liquid nicotine at a rate of $0.10 per fluid milliliter.” The measure included a one-time floor tax on current inventory of liquid nicotine that is due by October 1, 2018.

In September, Assemblyman John Burzichelli (D-Gloucester) introduced legislation that would replace the e-liquid tax with a “3.5 percent tax on the sale of all products containing nicotine” and repeal the floor tax. If enacted, Burzichelli’s proposal would promote public health and protect small businesses by reducing their overall tax burden.

Liquid nicotine is a vital component of electronic cigarettes, which are one of many types of tobacco harm reduction (THR) products. Taxes on THR products are counterproductive and offset some of the public gains these tools provide. Electronic cigarettes and vaping devices can effectively deliver nicotine without the harmful constituents associated with combustible tobacco smoke, and many public health groups have acknowledged the reduced risk associated with their use.  

In 2018, the National Academies of Sciences, Engineering, and Medicine found switching from combustible tobacco cigarettes to e-cigarettes “results in reduced short-term adverse health outcomes in several organ systems.” The same year, the American Cancer Society acknowledged “the exclusive use of e-cigarettes is preferable to continuing to smoke combustible cigarettes.”

This is consistent with earlier findings. For instance, in 2016, the Royal College of Physicians found e-cigarette use “unlikely to exceed 5% of the harm from smoking tobacco,” concluding that it is “in the interest of public health … to promote the use of e-cigarettes.” In a 2016 briefing, Cancer Research UK noted current evidence indicates e-cigarettes are less hazardous than tobacco cigarettes and that “it is important that regulation does not stifle [their] development.”

The use of electronic cigarettes in place of combustible cigarettes can also positively impact state budgets. J. Scott Moody, chief executive officer and chief economist at State Budget Solutions, analyzed the impact of THR products on health care costs. Moody estimated Medicaid savings could have amount to $48 billion in 2012 if e-cigarettes had been substituted by current Medicaid smokers.

A 2017 Policy Study by the R Street Institute analyzed a smaller number of Medicaid recipients switching from combustible cigarettes to e-cigarettes. Associate Fellow Richard B. Belzer used a sample size of “1% of smokers [within] demographic groups permanently” switching. Using this analysis, Belzer estimates Medicaid savings “will be approximately $2.8 billion per 1 percent of enrollees” over the next 25 years.

Notably, taxes on vaping products have not been successful in other states. For example, in 2016, Pennsylvania imposed a vaping tax on “40% of the purchase price of the wholesaler or manufacturer.” In 2017, a legislator said the 40 percent tax “has already resulted in the closure of more than 100 small businesses and the loss of several hundred jobs in the industry.”

Furthermore, research indicates these businesses “generate an annual non-online sales of more than $300,000 per store,” a monthly average of about $26,000.

As has happened elsewhere, imposing higher taxes in the Garden State on THR products will force stores to permanently close. Consequently, consumers of THR products will shop elsewhere, including online and out of state, for their vaping needs.

Although eliminating the tax on vaping products would be ideal, the proposed tax change would help soften the burden New Jersey vape shop owners would face come October 1 if the current tax goes into effect. Rather than imposing draconian taxes on devices that have helped millions quit smoking combustible cigarettes, New Jersey lawmakers should support a tax regime that does not undermine the sale of these products.


The following documents provide additional information on electronic cigarettes and tobacco harm reduction.

Vaping, E-Cigarettes, and Public Policy Toward Alternatives to Smoking
For decades, lawmakers and regulators have used taxes, bans, and burdensome regulations as part of their attempt to reduce the negative health effects of smoking. Recently, some have sought to extend those policies to electronic cigarettes. This booklet from The Heartland Institute urges policymakers to re-think that tax-and-regulate strategy. Policymakers should be mindful of the extensive research that supports tobacco harm reduction and understand bans, excessive regulations, and high taxes on e-cigarettes often encourage smokers to continue using more-harmful traditional cigarette products.

Research & Commentary: Study Finds E-Cigarettes Would Prevent 6.6 Million Premature Deaths–commentary-study-finds-e-cigarettes-would-prevent-66-million-premature-deaths
In this Research & Commentary, Heartland Institute State Government Relations Manager Lindsey Stroud examines an October 2017 Tobacco Control study that found electronic nicotine delivery systems (ENDS) might help extend life for millions of people. The authors of the study found there was an estimated 6.6 million fewer deaths and more than 86 million fewer-life-years lost over a ten year period because of ENDS products. Stroud concludes the use of ENDS could also help improve the budgets of numerous state programs, including Medicaid.

Research & Commentary: Public Health Officials Urge Use of Electronic Nicotine Delivery Systems
In this Research & Commentary, Heartland Institute State Government Relations Manager Lindsey Stroud notes the importance of NHS Health Scotland’s joint statement encouraging the use of electronic nicotine delivery systems (ENDS) as an alternative to tobacco products. NHS Health Scotland, Public Health England, and other groups have found ENDS are 95 percent less harmful than tobacco cigarettes.

Research & Commentary: Qualitative Study on E-cigarettes Shows More Evidence of Tobacco Harm Reduction
In this Research & Commentary, Heartland Institute State Government Relations Manger Lindsey Stroud examines a study, published in The International Journal of Environmental Research and Public Health in June 2016, that provides additional evidence showing e-cigarettes and vaporized nicotine products (VNPs) are an effective tobacco harm-reduction tool.

E-Cigarette Primer for State and Local Lawmakers
Joel Nitzkin provides evidence e-cigarettes work as a tobacco harm reduction modality and reviews the arguments against them. He closes with recommendations for actions state and local lawmakers should and should not consider regarding tobacco harm reduction and e-cigarettes. 

Research & Commentary: New CDC Report Finds Vaping Helps Smokers Quit
A new report released by the Centers for Disease Control and Prevention (CDC) found only 0.4 percent of the people who had never smoked tobacco in a CDC study group are current vapers, which the report defines as using a vaping device either every day or some days. The CDC report, the first of its kind, estimates e-cigarette use among U.S. adults using a nationally representative household survey. The report’s findings claim only 3.4 of adults who have never smoked have tried an e-cigarette; 12.6 percent of Americans have tried an e-cigarette; and fewer than 4 percent of the U.S. population are regular e-cigarette users.

E-Cigarettes Poised to Save Medicaid Billions
In a new report from State Budget Solutions, J. Scott Moody finds e-cigarette use could create significant savings for state governments, especially in their Medicaid programs: “As shown in this study, the potential savings to Medicaid significantly exceeds [sic] the state revenue raised from the cigarette excise tax and tobacco settlement payments by 87%. As such, the rational policy decision is to adopt a non-interventionist stance toward the evolution and adoption of the e-cig until hard evidence proves otherwise.”


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 Budget & Tax News website, The Heartland Institute’s website, our Consumer Freedom Lounge, and PolicyBot, Heartland’s free online research database.

Whether sending an expert to your state to testify or brief your caucus, hosting an event in your state, or simply sending you further information on the topic, Heartland can assist you. If you have any questions or comments, contact Government Relations Coordinator Arianna Wilkerson at [email protected] or 312/377-4000.