Research & Commentary: E-Cigarette Tax Will Vaporize Harm Reduction in the Badger State

Published April 22, 2019

Wisconsin lawmakers introduced companion legislation that would impose a so-called sin tax on e-cigarettes and vaping devices. Senate Bill 59 and Assembly Bill 56 would tax vaping products “at the rate of 71 percent of the manufacturer’s list price.” The tax would apply to all e-cigarette products, “regardless of whether the product contains nicotine.” The legislation would be a floor tax, meaning retailers would have to pay the tax on all existing inventory. The bills are in response to Gov.Tony Evers’ budget proposal seeking tax parity between combustible cigarettes and e-cigarettes and vaping devices.

Because sin taxes are meant to discourage use, they should not be applied to tobacco harm reduction products such as e-cigarettes. A draconian 71 percent tax on e-cigarette products will vaporize the industry in Wisconsin and burden public health.

Despite unfounded fearmongering campaigns aimed at e-cigarettes and vaping devices, these products have emerged as effective tobacco cessation tools. Nearly three million Americans have used e-cigarettes to quit smoking combustible cigarettes. A 2019 study in the New England Journal of Medicine found electronic cigarettes to be “twice as effective as nicotine replacement therapy” in helping smokers quit.

The reduced harm of e-cigarettes has been acknowledged by numerous public health agencies including Public Health England (PHE), the Royal College of Physicians, the American Cancer Society, and the National Academies of Sciences, Engineering, and Medicine. In late 2018, PHE reiterated their 2015 finding, declaring “vaping is at least 95% safer than smoking.”

Further, states are better off when residents switch from combustible cigarettes to e-cigarettes. In fact, one analysis estimated Medicaid savings could have amounted to $48 billion in 2012 if e-cigarettes had been adopted in place of combustible cigarettes by all Medicaid recipients who currently consume cigarettes. A 2017 study found Medicaid savings “will be approximately $2.8 billion per 1 percent of enrollees,” over the next 25 years if one percent of Medicaid recipients switched from combustible cigarettes to e-cigarettes.

E-cigarettes have also created significant revenues for state and local governments. One analysis finds vape shops “generate annual non-online sales of more than $300,000 per store.” The industry is expected to expand significantly in coming years. Over the past two years, online sales of e-cigarettes grew 41.3 percent from $345 million to $487.7 million. The global electronic cigarette markets “is estimated to reach $44,610.6 million by 2023.”

Although vape tax proponents believe it will help deter youth use of e-cigarettes, their belief is not backed up by recent evidence. An analysis on the effects of Pennsylvania’s 2016 40 percent wholesale tax found it did not deter youth e-cigarette use.

According to the 2015 Pennsylvania Youth Survey (PAYS), 15.5 percent of middle and high school students reported using an e-cigarette within the past 30 days. In 2017, PAYS found this increased to 16.3 percent of middle and high school students reporting past 30 day use of e-cigarettes. Notably, e-cigarette use among 10th and 12th graders increased from 20.4 and 27 percent respectively, in 2015, to 21.9 and 29.3 percent of 10th and 12th graders reporting e-cigarette use in 2017.

Although Pennsylvania’s vaping tax did not deter youth e-cigarette use, it did shut down brick-and-mortar vape shops. One year after the Pennsylvania tax went into effect, an estimated 120 vape shops closed in the Commonwealth. Similar to the Wisconsin bills, Pennsylvania’s tax applied to existing inventory and many business owners were unable to bear such a significant tax burden.

It is interesting Wisconsin lawmakers would even consider taxing tobacco harm reduction products, as the state dedicates less than one percent of tobacco-related moneys on helping smokers quit. In 2018, Wisconsin received an estimated $791.1 million in tobacco settlement payments and taxes. However, the Badger State spent only spent $5.3 million on tobacco prevention and cessation efforts.

Rather than creating burdensome taxes on harm reduction products, Wisconsin lawmakers should reform how the state currently uses tobacco funding. Despite alarmist campaigns aimed at e-cigarettes and vaping devices, these products are effective cessation tools. Even better, they can save money by reducing health care costs and generate revenue for state and local economies. Further, as indicated, taxes do not deter youth e-cigarette use and punish smokers who have used e-cigarettes to quit smoking.

The following documents provide more information on e-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.

Podcast Series: Voices of Vapers
In this weekly podcast series, State Government Relations Manager Lindsey Stroud talks with researchers, advocates, and policymakers about tobacco harm reduction and electronic cigarettes. The series provides important information about the thousands of entrepreneurs who have started small businesses thanks to THRs and the millions of adults that have used electronic cigarettes and vaping devices to quit smoking tobacco cigarettes.

Research & Commentary: Vaping Taxes Do Not Deter Youth Use of E-Cigarettes–commentary-vaping-taxes-do-not-deter-youth-use-of-e-cigarettes
In this Research & Commentary, Lindsey Stroud, a state government relations manager at The Heartland Institute, examines the effects of Pennsylvania’s 2016 40 percent wholesale tax on youth vaping. Using data from the Pennsylvania Annual Youth Survey, Stroud finds the tax did not curb youth e-cigarette use, and from 2015 to 2017, youth use of e-cigarettes increased in Pennsylvania. Stroud cautions lawmakers to avoid enacting taxes on e-cigarettes in an effort to address youth e-cigarette use.


Research & Commentary: Randomized Trial Finds E-Cigarettes Are More Effective Smoking Cessation Tool Than Nicotine Replacement Therapy–commentary-randomized-trial-finds-e-cigarettes-are-more-effective-smoking-cessation-tool-than-nicotine-replacement-therapy
Lindsey Stroud, a State Government Relations Manager at The Heartland Institute examines a study in The New England Journal of Medicine that finds e-cigarettes and vaping devices to be twice as effective as nicotine replacement therapy (NRT) in helping smokers quit cigarettes. Nearly 700 participants were studied over a 52-week period, with researchers finding that 18 percent of e-cigarette users reported abstinence, compared to 9 percent of those using NRT. Stroud writes that “these latest findings provide more valuable information on the public health role that e-cigarettes and vaping devices provide for the 38 million cigarette smokers in the United States,” an implores policymakers to regulate these devices in a way that promotes their usage.

Research & Commentary: Vaping Taxes and Bans Hurt Smokers Trying to Quit–commentary-vaping-taxes-and-bans-hurt-smokers-trying-to-quit
In this Research & Commentary, Heartland Institute Senior Policy Analyst Matthew Glans and State Government Relations Manager Lindsey Stroud examine vaping bans and taxes and consider how such measures block or limit what is for many smokers an effective method for halting the use of 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 Manager 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.

Research & Commentary: Despite Scientific Evidence, More Americans Believe E-Cigarettes Are as Harmful as Tobacco Cigarettes–commentary-despite-scientific-evidence-more-americans-believe-e-cigarettes-are-as-harmful-as-tobacco-cigarettes
In this Research & Commentary, Lindsey Stroud, a state government relations director at The Heartland Institute, discusses a 2019 study that found the number of Americans who believe e-cigarettes are just as harmful as tobacco cigarettes has increased. Stroud says state legislation that regulates, taxes, and even prohibits e-cigarettes have helped to fuel Americans’ misperceptions and urge lawmakers to move forward with legislation that promotes the use of e-cigarettes as an important tobacco harm reduction tool.

Research & Commentary: Largest Vaping Survey Finds Flavors Play Important Role in Tobacco Harm Reduction–commentary-largest-vaping-survey-finds-flavors-play-important-role-in-tobacco-harm-reduction
In this Research & Commentary, Heartland State Government Relations Manager Lindsey Stroud examines a survey of nearly 70,000 adult vapers in the United States. The survey was completed in response to the U.S. Food and Drug Administration’s recent Advanced Notice of Proposed Rulemaking seeking comment on the role of flavors in tobacco products. The authors found nearly 95 percent of survey respondents were at one time smokers and the majority reported using flavors at the point of e-cigarette initiation. Stroud compares this to other surveys. She concludes, “eliminating flavors will force [vapers] to vape only tobacco-flavored e-cigarettes, which would likely cause them to return to combustible cigarettes.” Stroud also found research has found e-cigarettes are a key tobacco harm reduction product and could help alleviate state budgets by mitigating health care costs.

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.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Lindsey Stroud, a state government relations manager at Heartland, at [email protected] or 757/354-8170.