Research & Commentary: Georgia’s Vaping Tax Increase Is an Unreliable Source of Funding During Shaky Times

Published July 9, 2020

On July 26, the Georgia State Senate put its final stamp of approval on Senate Bill 375, a comprehensive piece of vaping and tobacco legislation that would impose a 7 percent tax on vaping products.

The new levy, when combined with licensing fees for sellers of vaping products, is predicted to raise $9.6 million to $14.5 million in the upcoming fiscal year, according to state estimates.

Unfortunately, however, vaping and tobacco taxes are historically unreliable.

Tobacco tax increases often result in long-term revenue shortfalls. From 2001 to 2011, “revenue projections were met in only 29 of 101 cases where cigarette/tobacco taxes were increased,” according to the National Taxpayer Union Foundation.

In addition, lower-income Americans have a greater tendency to spend a larger share of their disposable income on cigarettes, vaping, and tobacco products, which means the tax hikes included in SB 375 disproportionately impact impoverished and working class Georgians.

Cato Journal article notes from 2010 to 2011, “smokers earning less than $30,000 per year spent 14.2 percent of their household income on cigarettes, compared to 4.3 percent for smokers earning between $30,000 and $59,999 and 2 percent for smokers earning more than $60,000.”

Despite never-ending campaigns that supply false information and portray an incorrect narrative, e-cigarettes are significantly less harmful than combustible tobacco cigarettes. In 2015, Public Health England (PHE), a renowned public health agency, declared e-cigarettes are 95 percent less harmful than tobacco cigarettes. In 2018, PHE confirmed its 2015 finding, determining that “vaping is at least 95% safer than smoking.” 

Other public health groups, including the Royal College of Physicians; National Academies of Sciences, Engineering, and Medicine; and the American Cancer Society have also acknowledged the reduced harm of e-cigarettes.

In light of these and many other studies, vaping taxes should be avoided to encourage the use of tobacco harm reduction products.

Placing heavier burdens on the vaping industry would have substantial economic effects that would reduce employment and harm the Georgia jobs industry. According to the Vapor Technology Association, in 2018, the industry created in Georgia 2,532 direct vaping-related jobs, including manufacturing, retail, and wholesale jobs, generating $87 million in wages.

Furthermore, the vaping industry has created hundreds of subsidiary jobs in Georgia, bringing the total economic impact of the vaping industry in 2018 to $644,293,500.

The harm caused by the proposed taxes could not come at a more inopportune time.

According to WalletHub, Georgia has experienced one of the steepest job losses resulting from  COVID-19 crisis. In Georgia, the annual change in unemployment claims experienced since the onset of the coronavirus pandemic was a whopping 3,987 percent. Thus, prioritizing a vaping tax over the protection of jobs in the vaping industry during this unprecedented economic circumstance should be a decision made with significant consideration when SB 375 crosses Governor Brian Kemp’s desk.

Moving forward, Peach State lawmakers should avoid relying on increasing e-cigarette and vaping taxes. Rather than using “sin taxes” to punish the users of products that have aided millions of smokers seeking to quit using combustible tobacco cigarettes, lawmakers should celebrate the benefits of electronic cigarettes and vaping devices.

The work of previous Heartland Institute employees is reproduced in this report. 

The following articles provide more information about sin taxes and tobacco harm reduction.

Cigarette Taxes and Smoking

In this study from the Cato Institute, Kevin Callison and Robert Kaestner suggest future cigarette-tax increases would offer relatively few public health benefits. They further, say the justification given for future taxes should be based on the public finance aspects of cigarette taxes, such as their volatility, regressive nature, and the rate of revenue growth associated with such taxes.

Three Reasons to Avoid Tobacco Taxes

In this article, Elizabeth Stelle of the Commonwealth Foundation examines Pennsylvania’s proposed tobacco tax hikes. Stelle argues they are the wrong prescription for the state, and she outlines several reasons why they are harmful.

Research & Commentary: Top Ten Reasons Not to Raise Tobacco Taxes

In this Research & Commentary, Former Heartland Institute Government Relations Director John Nothdurft argues targeted tax increases serve only to push sound fiscal policies and real budget reforms to the public policy back burner. Northdurft argues legislators concerned about the public health effects of tobacco should encourage the use of readily available smoking cessation products and services instead of supporting bad tax policy.

Five Things to Consider Before Raising Tobacco Taxes: A Review of the Research

This important Heartland Institute Policy Brief argues, “Tax increases above current levels are not justified by appealing to the costs smokers impose on nonsmokers. Smokers already pay more than this measure could justify.”

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. The authors argue 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.

The work of previous Heartland Institute employees is reproduced in this report.

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 former Heartland state government relations manager, 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 former state government relations manager at The Heartland Institute, examines the effects of Pennsylvania’s 40 percent wholesale tax on youth vaping, passed in 2016. Using data from the Pennsylvania Annual Youth Survey, Stroud argues the tax did not curb youth e-cigarette use, and she says from 2015 to 2017, youth use of e-cigarettes increased in Pennsylvania. Stroud says lawmakers should avoid enacting taxes on e-cigarettes to address youth e-cigarette use.

Policy Tip Sheet: Tobacco Harm Reduction 101: Georgia

In this Policy Tip Sheet, Lindsey Stroud, a former state government relations manager at The Heartland Institute, analyzes the vaping industry in Georgia using, data covering state health department findings on vaping-related lung illness, youth e-cigarette use, tobacco retail compliance checks, and state funding dedicated to tobacco control programs.


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

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