Economics, Taxes and Spending

Don’t tax e-cigarettes

Image Credit: shutterstock

Image Credit: shutterstock

Although Marlboro Man and Joe Camel are icons of the past thanks to smoking’s widely recognized health risks, a new tobacco product has recently emerged: e-cigarettes. As e-cigarettes have increased in popularity, so have proposals to regulate and tax them. The FDA is preparing to propose new regulations that will regulate e-cigarettes under the same statute used to regulate traditional cigarettes. A number of states are considering taxing e-cigarettes like traditional cigarettes, and Senate Democrats have introduced three bills that would do the same at the federal level as soon as the FDA begins regulating e-cigarettes. In an article published today in Tax Notes, we explain why taxing e-cigarettes like traditional cigarettes would be a bad idea.

Supporters of taxing e-cigarettes make three flawed arguments:

  1. “Walks like a duck, must be a duck” fallacy: while some e-cigarettes look like traditional cigarettes, they do not kill like cigarettes. Although e-cigarettes contain the addictive chemical nicotine, experts consider e-cigarettes to be 95 to 99% safer than cigarettes. The fact that the products have a similar appearance is simply not relevant to considerations of appropriate taxation.
  2. “The government needs the money” fallacy: state and federal tax revenue from traditional cigarettes has been declining, and some people see taxing e-cigarettes as a way to offset this revenue loss. But that makes as much sense as replacing tobacco tax revenues with a tax on chewing gum.
  3. “Gateway to cigarettes” fallacy: there is currently no reliable statistical evidence that e-cigarette consumption leads to smoking traditional cigarettes. Indeed, surveys show that smokers use e-cigarettes to cut back on cigarette consumption or to quit smoking altogether. This issue deserves continued study, but the lack of evidence that e-cigarettes are a gateway to traditional cigarettes negates this argument for taxing e-cigarettes.

Taxing e-cigarettes would be appropriate only if they pose serious health risks or lead to an increase in smoking. But current evidence points to neither. Therefore, the right tax at this time is no tax.

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One thought on “Don’t tax e-cigarettes

  1. The thick vapor can even be puffed into smoke rings ‘ ahem, vapor rings ‘ it’s the real deal, but better.

    Since traditional cigarettes include tobacco, cigarette brands are restricted with the various flavours that they offer.

    The new e-cigs however offer a clean smoking experience with no cigarette
    smell or stained teeth at the end of it.

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