Research & Commentary: Ohio’s Misguided Vaping Taxes Would Do More Harm Than Good

Published June 17, 2019

Ohio lawmakers inserted a tax on electronic cigarettes and vaping devices in their fiscal year 2020–21 operating budget. The new budget would also raise the age to purchase tobacco products, including e-cigarettes, from 18 to 21. Substitute House Bill 166 would apply a 17 percent wholesale tax on e-cigarette products, which is the same excise tax rate currently imposed on other tobacco products, including cigars and pipes.

Sub. H.B. 166 would define vapor products as “any component, part, or additive that is intended for use in an electronic smoking device, a mechanical heating element, battery, or electronic circuit and is used to deliver the product.” All collected tax revenue would be earmarked to the state’s general fund.

Lawmakers should not impose “sin taxes” on tobacco harm reduction products. Since their introduction to the U.S. market, an estimated three million American adults have used e-cigarettes and vaping devices to quit smoking. Moreover, a 2019 study in The New England Journal of Medicine found the use of e-cigarettes to be “twice as effective” as nicotine replacement therapy.

Some Ohio senators argue a tax on e-cigarettes would deter youth tobacco and nicotine use. Indeed, Sen. Matt Dolan (R-Chargin Falls) said, “If we’re going to be able to discourage its use and help regulate it, it needed to be part of the taxing authority.” Although their intent is laudable, there is no evidence vaping taxes reduce youth use of e-cigarettes.

There is no evidence vaping taxes will stop youth use of vaping devices. In 2016, Pennsylvania enacted a 40 percent wholesale tax on vaping products. A Heartland Institute analysis on the effects of Pennsylvania’s wholesale tax on youth e-cigarette use found young Pennsylvanians in middle and high school actually increased their use of e-cigarettes in the period following the implementation of the tax. 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 in 2017.

Pennsylvania’s wholesale tax had a disastrous effect on small businesses as well. Within a year of its implementation, an estimated 120 vape shops went out of business in the Keystone State. This carries significant economic consequences. Vape shops “generate annual non-online sales of more than $300,000 per store.”

The proposed legislation also fails to take into account the public health gains e-cigarettes provide. In 2015, Public Health England noted the use of e-cigarettes to be “95% safer than smoking.” Other public health organizations including the Royal College of Physicians, National Academies of Sciences, Engineering, and Medicine, and the American Cancer Society have acknowledged the reduced harm of e-cigarette use.

Further, the use of e-cigarettes could actually reduce health care costs for Ohioans. A 2015 analysis examined e-cigarettes’ effect on Medicaid spending. The study found Medicaid savings could have amounted to $48 billion in 2012 if e-cigarettes had been adopted in place of combustible tobacco cigarettes by all Medicaid recipients who currently smoke.

A 2017 study examined a smaller number of Medicaid recipients using e-cigarettes instead of combustible cigarettes. In this analysis, the author estimates that Medicaid savings “will be approximately $2.8 billion per 1 percent of enrollees” over the next 25 years.

Perhaps most problematic is Ohio’s intention to tax those who have quit smoking combustible cigarettes through the use of e-cigarettes. Ohio dedicates very little funding to help smokers quit. In 2018 Ohio “received $1.332 billion in tobacco settlement payments and taxes.” Of this, only $12.5 million, or less than 1 percent, was dedicated to tobacco prevention and cessation programs.

Rather than imposing draconian taxes on products that are significantly less harmful than combustible cigarettes, lawmakers should encourage their use. As a tobacco harm reduction tool, e-cigarettes are effective smoking cessation devices and should not be subjected to sin taxes.  

The following documents provide more information about tobacco harm reduction and electronic cigarettes and vaping devices.

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: Randomized Trial Finds E-Cigarettes Are a 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
In this Research & Commentary, Lindsey Stroud, a state government relations manager at The Heartland Institute, examines a study in The New England Journal of Medicine that shows e-cigarettes and vaping devices are twice as effective as nicotine replacement therapy (NRT) in helping smokers quit using tobacco cigarettes. Nearly 700 participants were studied during a 52-week period. Researchers found that 18 percent of e-cigarette users reported abstinence, compared to 9 percent of those using NRT. Stroud wrote 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,” and she implores policymakers to regulate these devices in a way that promotes, rather than prohibits, their use.

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: 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.

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.

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