Research & Commentary: Floor Tax Would Vaporize Tobacco Harm Reduction Options in Nevada

Published March 26, 2019

Lawmakers introduced legislation in Nevada that would tax e-cigarettes and vaping products. The bill would also require wholesale dealers and retailers of these products to be licensed.

Senate Bill 263 would apply Nevada’s other tobacco product tax, currently applied to tobacco products other than cigarettes,  on e-cigarettes at “30 percent of the wholesale price.” If passed into law, the legislation would charge retailers and wholesalers an annual license fee of $50 and $650, respectively.

The tax would apply to all e-cigarette products, including e-liquids, regardless of whether they contain nicotine. The tax would also apply to other components, including “containers, atomizers, [and] batteries.”

The proposed levy would be a floor tax, meaning it would apply to all existing inventory in retail locations. Retailers would be required to pay the tax on “vapor products dealers have in their inventory as of” July 1, 2019.

Lawmakers should avoid draconian taxes on vaping products. E-cigarettes are significantly less harmful than combustible tobacco cigarettes and have helped millions of smokers quit. These products can also provide a positive impact to state budgets because they reduce health care costs associated with combustible tobacco cigarettes. Moreover, the electronic cigarette industry is a thriving industry for local and state economies.

Electronic cigarettes and vaping devices are “95 % safer” than combustible cigarettes, according to Public Health England. In 2016, the Royal College of Physicians found e-cigarettes “unlikely to exceed 5% of the harm from smoking tobacco.” In 2018, the National Academies of Sciences, Engineering, and Medicine and the American Cancer Society noted the reduced harm of e-cigarettes and vaping devices.

Of the estimated 10 million American adult vapers, nearly three million have used e-cigarettes to quit smoking. A 2019 study published in The New England Journal of Medicine finds the use of e-cigarettes and vaping devices to be “twice as effective as nicotine replacement [therapy] at helping smokers quit.”

E-cigarettes help offset health care costs associated with tobacco cigarettes. In fact, Medicaid recipients smoke at rates “more than double for adults with private insurance,” according to the Centers for Disease Control and Prevention.

State Budget Solutions concluded states would have saved $48 billion in 2012 if all Medicaid recipients who smoked tobacco cigarettes had switched to e-cigarettes. R Street Institute examined 1 percent of the same Medicaid population switching to e-cigarettes and estimated Medicaid savings “will be approximately $2.8 billion per 1 percent of enrollees” over the next 25 years.

A 30 percent wholesale floor tax would decimate Nevada’s e-cigarette industry. In 2016, Pennsylvania applied a 40 percent wholesale tax to vaping devices. Within a year, about 120 vape shops, a third of all shops, closed in the Keystone State.

Moreover, lawmakers should recognize the many economic benefits vape shops provide. A typical vape shop “[generates] annual non-online sales of more than $300,000 per store.” An analysis of vape shops in the San Francisco Bay area found stores employee, on average, three workers. The industry is also expected to continue to grow, with the global market “estimated to reach $44,610.6 million by 2023.”

Rather than imposing a burdensome wholesale floor tax on e-cigarettes and vaping devices, which would essentially vaporize the industry, Nevada lawmakers should promote the use of tobacco harm reduction products. E-cigarettes have been successful tools in helping smokers quit, provide significant savings for the health care system and taxpayers, and deliver a shot in the arm to local and state economies.

The following articles provide more information about tobacco harm reduction and electronic cigarettes. 

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: 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: E-Cigarettes Help Military Service Members Quit Smoking–commentary-e-cigarettes-help-military-service-members-quit-smoking
In this Research & Commentary, Lindsey Stroud, a state government relations manager at The Heartland Institute, examines a new report that finds smoking rates among military service members have declined to rates lower than those in the general public. A 2018 study by the Rand Corporation found “13.9 percent of service members were current cigarette smokers, and 7.4 percent smoked cigarettes daily.” For comparison, Rand found 16.8 percent of the general public currently smoke and 12.9 percent identify as daily smokers. Rand also found that a significant proportion of military service members use electronic cigarettes, with 12.4 percent reporting use in the previous month and 11.1 percent reporting daily use.

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.”

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: 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: 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: 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.


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.