Research & Commentary: Vermont’s Vaping Tax Will Stifle Tobacco Harm Reduction

Published May 30, 2018

Due to a budget impasse, Vermont legislators are in a special session, which is costing taxpayers in the Green Mountain State an estimated $60,000 per day. As lawmakers scramble to allocate state funding mechanisms, one proposal will significantly impact cigarette smokers who are trying to quit.

The proposal would impose a 46 percent wholesale tax on the liquid (e-liquid) used in electronic cigarettes or vaping devices, including e-liquids containing zero nicotine. The revenue will not be dedicated to the State Health Care Resources Fund, as tobacco and other excise taxes in earlier years have been, rather the funds will be placed in the General Fund in fiscal year 2019. This is to “to offset any revenue impact” stemming from other provisions in the legislation, including changes in “first time homebuyer program, the downtown and village center tax credit, and the taxable meal exclusions.”

Opponents of tax increases on tobacco harm reduction (THR) products such as smokeless tobacco, e-cigarettes and vaping devices, and heat-not-burn products, note these are counterproductive and offset the public health gains these products offer to combustible cigarette smokers. Moreover, ample research indicates that electronic cigarettes are significantly less harmful than tobacco cigarettes and are an important tool to helping smokers quit.

Public health organizations have spent the past several years researching the role of e-cigarettes and vaping devices. In 2016, the Royal College of Physicians said that e-cigarette use “is unlikely to exceed 5% of the harm from smoking tobacco,” concluding that it is “in the interests of public health … to promote the use of e-cigarettes.” In a November 2016 briefing, Cancer Research UK noted that current evidence indicates e-cigarettes are less hazardous than tobacco cigarettes and that “it is important that regulation does not stifle [their] development.”

In January 2018, the National Academies of Sciences, Engineering and Medicine concluded that e-cigarette use resulted in “reduced short-term adverse health outcomes in several organs and the American Cancer Society (ACS) acknowledged that “the exclusive use of e-cigarettes is preferable to continuing to smoke combustible cigarettes.”

Another problem is that this tax will negatively impact Vermont’s vaping industry. Since Pennsylvania passed a similar tax in 2016 an estimated 120 vaping businesses have closed. Research analyzing retail markets estimates that vape shops “generate annual non-online sales of more than $300,000 per store,” and average $26,000 in monthly sales. Should Vermont impose a 46 percent floor tax on e-liquids, vape shops will be forced to shut their doors and consumers will be forced to look elsewhere, including online and neighboring states, for their vaping or e-cigarette needs.

Lawmakers ought to promote e-cigarettes and vaping because these products could save states billions. In a 2017 policy study by R Street, Associate Fellow Richard B. Belzer examined the financial impact to Medicaid costs, should a number of current Medicaid recipients switch from combustible cigarettes to electronic cigarettes and vaping devices. Belzer used a sample size of “1% of smokers [within] demographic groups permanently” switching. Using this analysis, Belzer estimates that Medicaid savings “will be approximately $2.8 billion per 1 percent of enrollees,” over the next 25 years.

Rather than imposing draconian taxes on products that have aided thousands of smokers with quitting combustible tobacco cigarettes, Vermont lawmakers should promote the use of electronic cigarettes and vaping devices. Evidence continues to mount that these products are safer than tobacco cigarettes and should be treated as such.


The following documents provide further information on 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: Cities and Sates Consider Increasing Tobacco Age Limit to 21, Regulating ENDS as Tobacco Products–commentary-cities-and-states-consider-increasing-tobacco-age-limit-to-21-regulating-ends-like-tobacco-products
In this Research & Commentary, Heartland Institute State Government Relations Manager Lindsey Stroud examines the states and municipalities that are considering increasing their smoking age from 18 to 21. Stroud says such laws fail to substantially curb consumption, and she argues the inclusion of tobacco harm reduction tools, such as e-cigarettes and vaping devices, would negatively impact the health gains these products have been repeatedly shown to provide.

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 State Government Relations Manager Charlie Katebi at [email protected]  or 312/377-4000.