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The Inevitable Tax On Electronic Cigarettes

By Tyler McCanus

Wednesday April 29, 2015
cigarette taxes by state what will ecig taxes look like
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One of the biggest reasons that millions of people have made the switch to electronic cigarettes is the cost difference, where ecig prices are much lower generally and are offered as tax-free cigarettes. A tax on electronic cigarettes hasn’t taken hold yet and so the market continues to be filled with cheap ecigs, some of which are only cheap in comparison to how much traditional tobacco cigarettes cost these days.

Depending on where you live, cigarette prices can cost you as much as $12.85 per pack! Even in Virginia and Missouri, the least expensive states when it comes to cigarettes, you’ll have to fork over $5.25 for a pack of smokes. This is way higher than current ecig prices and holds a big economic lure, especially with the economy not fully recovered yet.

Of course a big reason that analogue cigarettes are so expensive is the massive amount of taxes that are tacked onto their price. These taxes vary from state to state, but they can significantly affect the prices of a pack of traditional tobacco cigarettes. How much? You can see a full list of cigarette prices here but the most glaring example is New York, where state taxes account for $4.35. That means more than one third of smokers’ costs for cigarettes are going to state taxes. This is in addition to the existing $1.01 national tax on a pack of analogue smokers.

Now you know why ecig prices sound so appealing to existing smokers who crave tax-free cigarettes to save on their already limited budgets and thus look to cheap ecigs as an answer.

All of that is expected to change as the idea of a tax on electronic cigarettes gains traction. If you have followed any of the news in the past year or longer, you will know that many politicians are pushing for ecigs to be regulated in a similar manner as traditional tobacco cigarettes. This means keeping advertising limited or non-existent and, perhaps more importantly, heavily taxing the ecigs that are on the market today.

Politicians Regulating Vape Products, Vape Pens

For some, the reasoning is in doing so is that ecigarettes are too similar to analogue cigarettes and should be treated as such. What that inherently means is that they believe or fear that ecigs are bad for the public, because that is the essentially the reason why tax-free cigarettes are a thing of the past. Honestly I doubt the know the difference between an ecig and what is a vape pen. Long ago it was decided that it was okay to tax tobacco cigarettes in large amounts so as to change the behavior of the public by making it more expensive for them to buy.

The image above shows the level of taxation on cigarettes in each state.  Will any forthcoming tax on electronic cigarettes follow the same pattern?

Will Taxing Ecigs Discourage Smokers From Trying Vaping?

how much will a tax on ecigarettes affect prices and vaping overallThe efficacy of taxing cigarettes is a matter of debate and we know that, despite the high prices, million of Americans continue to smoke. It doesn’t seem to deter them enough and obviously some of that has to do with the highly addictive makeup of tobacco cigarettes.

Ecig prices being much lower than the cost of traditional tobacco cigarettes creates a lure for smokers, but it also gives those who have wanted to make the switch an additional incentive to do so. A rise in ecig prices could change some of that, but will all of that appeal go down the drain if and when an ecigarette tax becomes commonplace?

One reason it won’t is because there are still too many benefits if ecigs to ignore. Economics is definitely a big consideration, but the tastes, smell, and convenience of ecigarettes place a large role too. It is debatable how much ecig prices could rise, but even a moderate amount couldn’t eliminate completely the appeal of ecigarettes.

We could also think of this as one way in which ecigs will have made the transition into the mainstream and perhaps face less opposition in the way of bans and the like.

Unfortunately any widespread tax on electronic cigarettes could also be used as a way to ratchet up pressure against the industry. If politicians were to deem the industry as parallel to traditional tobacco cigarettes, it would be easy for them to simply raise ecig prices via taxes. Not to mention the millions that would come into the state coffers and make those same politicians look good for their budgets.

A recent analysis in the Arizona state legislature estimated that an ecigarette tax could bring in $6 million a year. That would certainly help close some of the budget deficits states are experiencing, but at what cost to smokers?

The fact is that states should be encouraging smokers to find a reasonable alternative such as electronic cigarettes. Taxing them in the same way as cigarettes would definitively discourage some from trying ecigs and that is a loss for everyone involved.

There is something to be said about normalizing ecigarettes with regulation and even some smaller level of a tax, but the handiness of an ecigarette tax to be used for political purposes scares us. We should all keep a very close eye on our local and state legislatures to see what they are up to with regard to the taxation of ecigarettes, because this is one of the bigger issues that could affect how the electronic cigarette revolution takes hold in America.

Tyler,

Team ECCR

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