Category: Taxation

‘Proposed Vapor Tax Would Lead to Millions More Smokers’

Photo: New Africa
Guy Bentley
The nicotine tax in the U.S. Build Back Better Plan bill will negatively affect public health and hurt lower- and middle-class Americans, according to Guy Bentley, director of consumer freedom research at the Reason Foundation.
The current version of ever-changing proposal would introduce a new tax on e-cigarettes and other smoking alternatives, which research suggests are dramatically safer options for smokers.
A 6 milligram nicotine/30 milliliter bottle of e-liquid, for example, would be taxed at a rate of $5.01 under the proposal. A typical pack of e-liquid pods would be taxed at $4.59. The federal tax on cigarettes is $1.01 per pack. Thus, e-cigarettes would be taxed more than regular cigarettes, and dramatically more so in states that already levy their own high e-cigarette taxes.
Writing on the Reason Foundation’s website, Bentley cites Michael Pesko of Georgia State University, who estimates the new tax on nicotine alternatives would cause 2.7 million more daily adult smokers, 530,000 more teen smokers and 29,000 more prenatal smokers.
This is because e-cigarettes are substitutes, not complements to combustible cigarettes, and millions of American ex-smokers have used these products to get off smoking traditional cigarettes.
Bentley says the tax is also highly regressive and would violate President Biden’s campaign promise not to raise taxes on people earning less than $400,000 a year. According to a recent Gallup poll, Americans with an annual household income of less than $40,000 are significantly more likely to vape than higher-income groups.
“With more than 15 million adult vapers now in America, many of whom attribute their ability to quit or reduce smoking traditional cigarettes to their use of e-cigarettes, it’s baffling House Democrats would consider targeting this group with a huge tax increase that could push many of them back to smoking and worsen public health,” wrote Bentley.
November 11, 2021
Capitol Crisis

Credit: Bbourdages
A proposed tax bill in U.S. Congress would add $40 to the cost of a 120 mL bottle of e-liquid with 6 mg of nicotine.
By VV staff
The proposed U.S. Tobacco Tax Equity (TTE) Act would tax vaping products the same as combustible cigarettes. According to research from the Tax Foundation, an independent tax policy nonprofit, the proposal would double the rates on combustible cigarettes and increase the rates on all other tobacco and nicotine products—including electronic nicotine-delivery systems (ENDS)—to achieve parity with the traditional tobacco tax rate.
The proposed rule aims for the tax per 1,000 cigarettes to be increased to $100.66. Vaping products would be taxed at this same rate, with 1,000 cigarettes being equal to 1,810 mg of nicotine.
“In addition to the one-time increase, the rates would be indexed to inflation, which means they would automatically increase every year,” the report states. “According to Tax Foundation estimates, the tax increases would raise $112 billion over 10 years. The bulk of the revenue, $74.8 billion, is from the doubling of cigarette taxes. The tax on vapor products would raise roughly $15 billion over 10 years.”
According to Alex Norcia of Filter, the proposal would benefit large corporations and traditional tobacco products while unfairly hurting people in lower socioeconomic classes as most smokers do not typically belong to the upper classes. Current cigarette smoking in the United States “is higher among people with low annual household income than those with higher annual household incomes,” according to the U.S. Centers for Disease Control and Prevention.
“This means that a 30 mL bottle of e-liquid containing 3 mg of nicotine per milliliter would be subject a tax rate of $5 for the bottle. A 120 mL bottle of e-liquid that contains 6 mg of nicotine per milliliter would attract a tax rate of $40 for the bottle,” writes Norcia. “In comparison, critics and tax reformists have estimated that a four-pack of Juul pods would be taxed around $9—giving a clear advantage to a giant over the smaller player. More alarmingly, a pack of cigarettes would only be taxed around $2, creating an incentive for nicotine users to pick cigarettes over less risky vapor products.”
In an interview with C-Span on Sept. 15, White House Press Secretary Jen Psaki was asked if the White House believes that the proposed bill on taxing tobacco/vaping products would violate President Biden’s promise to not raise taxes on those making under $400,000 per year. She replied, “No, we don’t,” adding that it was “just one of the ideas out there.”
Vape shops are saying that the proposed tax increase would “completely destroy” their businesses, saying it would be even worse than the U.S. Food and Drug Administration’s failure to approve any ENDS products by the Sept. 9 deadline (see “Authorization Denied,” page?) and the issuing of hundreds of marketing denial orders (MDOs).
“This is going to more than double, and in some cases triple or quadruple, the price of liquids that I sell,” Keith Gossett, the owner of Bucky’s Vape Shop in Columbus, Georgia, told Reason. “I’m going to sit there and try to tell a man with a $6 pack of cigarettes that my [$75] product is better. This tax will close my shop.”
Rather than protecting public health, high excise taxes on lower risk tobacco products jeopardize public health by pushing consumers back to smoking combustible products, according to the Tax Foundation report. “If the policy goal of high taxes on cigarettes is to encourage cessation, taxation of other tobacco and nicotine products must be considered a part of that policy design,” the report states.
The last time the federal excise tax on tobacco was increased was in 2009. While the federal tax has not changed for 12 years, the average tax paid by consumers has increased drastically. Including the last federal increase, the average combined state and federal excise tax rate on tobacco products has jumped more than 80 percent (the average state excise tax rate increased 65 percent between 2009 and 2021), according to the Tax Foundation.

October 25, 2021
EU Taxation Consultation Split Over Vapor Issues

Image: mazhor
Participants in the public consultation organized by the European Commission on the review of the Tobacco Taxation Directive are split on many questions relating to e-cigarettes and e-liquids, according to the Independent European Vape Alliance (IEVA).
Following the publication of the raw data by the European Commission, the IEVA conducted a preliminary analysis of the first results.
According to the group, the participation rate to this public consultation was higher than usual. The survey gathered 7,262 answers, 89.2 percent originating from EU citizens, 6 percent from companies and business organization and 1.1 percent from business associations.
Most active respondents were based in France (26.9 percent), Greece (23.2 percent), Germany (7.9 percent), Poland (6.5 percent), Italy (5.8 percent), Romania (5 percent) and Spain (4.3 percent).
Regarding specific questions on e-cigarettes and e-liquids, the results provide some light trends but the answers remain overall even split:
Harmonization of tax rules for e-liquids containing nicotine:
45.6 percent against, 44.8 percent in favor, almost 10 percent undecided
Harmonization of tax rules for e-liquids that do not contain nicotine:
50.8 percent against, 40 percent in favor, almost 10 percent undecided
Establishment of a minimum tax on e-cigarettes:
46.7 percent answered “none,” 41.6 percent answered “€0.10/ml,” 5.6 percent answered “€0.30/ml,” 6.1 percent said either “don’t know” or provided no answer.
According to the IEVA, The main question to be answered now is how the Commission will interpret the 10 percent indecisive parties for the first and the second question, as those 10 percent could tilt the balance in a way or another.
Following the closure of the public consultation, the European Commission may now complete drafting of the proposal to revise the tobacco taxation directive. The IEVA expects the document to be presented in the fourth quarter of 2021 or the first quarter of 2022.
October 6, 2021
Tobacco Bill Would Tax Vapor Same as Combustibles
The proposed U.S. Tobacco Tax Equity (TTE) Act would tax vaping products the same as combustible cigarettes. According to research from the Tax Foundation, an independent tax policy nonprofit, the proposal would double the rates on combustible cigarettes and increase the rates on all other tobacco and nicotine products – including electronic nicotine-delivery systems (ENDS) – to achieve parity with the traditional tobacco tax rate.
Credit: TS Donahue
The proposed rule aims for the tax per 1,000 cigarettes to be increased to $100.66. Vaping products would be taxed at this same rate, with 1,000 cigarettes being equal to 1,810 milligrams of nicotine.
“In addition to the one-time increase, the rates would be indexed to inflation, which means they would automatically increase every year,” the report states. “According to Tax Foundation estimates, the tax increases would raise $112 billion over 10 years. The bulk of the revenue, $74.8 billion, is from the doubling of cigarette taxes. The tax on vapor products would raise roughly $15 billion over 10 years.”
According to Alex Norcia of Filter, the proposal would benefit large corporations and traditional tobacco products, while unfairly hurting people in lower socioeconomic classes as most smokers do not typically belong to the upper classes. Current cigarette smoking in the United States “is higher among people with low annual household income than those with higher annual household incomes,” according to the Centers for Disease Control and Prevention.
“This means that a 30-milliliter bottle of e-liquid containing 3 milligrams of nicotine per milliliter would be subject a tax rate of $5 for the bottle. A 120-milliliter bottle of e-liquid that contains 6 milligrams of nicotine per milliliter would attract a tax rate of $40 for the bottle,” writes Norcia. “In comparison, critics and tax reformists have estimated that a four-pack of Juul pods would be taxed around $9—giving a clear advantage to a giant over the smaller player. More alarmingly, a pack of cigarettes would only be taxed around $2, creating an incentive for nicotine users to pick cigarettes over less-risky vapor products.”
Credit: Tax Foundation
The TTE Act as part a massive $3.5 trillion spending bill appear to be heading for a collision with President Joe Biden’s pledge not to raise taxes on America’s middle class. In an interview with C-Span on Sept. 15, White House Press Secretary Jen Psaki was asked if the White House believes that the proposed bill on taxing tobacco/vaping products would violate Biden’s promise to not raise taxes on those making under $400,000 per year. She replied, “No, we don’t,” adding that it was “just one of the ideas out there.”
Vape Shop owners are saying that the proposed tax increase would “completely destroy” their businesses, saying it would be even worse than the U.S. Food and Drug Administration’s failure to approve any ENDS products by the Sept. 9 deadline and the issuing of nearly 200 marketing denial orders (MDOs).
“This is going to more than double, and in some cases triple or quadruple, the price of liquids that I sell,” says Keith Gossett, the owner of Bucky’s Vape Shop in Columbus, Georgia, told Reason. “I’m going to sit there and try to tell a man with a $6 pack of cigarettes that my [$75] product is better. This tax will close my shop.”
The last time the federal excise tax on tobacco was increased was in 2009. While the federal tax has not changed for 12 years, the average tax paid by consumers has increased drastically. Including the last federal increase, the average combined state and federal excise tax rate on tobacco products has jumped more than 80 percent (the average state excise tax rate increased 65 percent between 2009 and 2021), according to Tax Foundation.
September 15, 2021
25% Wholesale Vapor Tax Clears Indiana Senate Hurdle
A bill in Indiana that will bring new taxes on vaping as well as a broad framework for disbursing future opioid litigation settlement cash is expected to be signed into law by Governor Eric Holcomb, today. It’s Indiana’s first-ever tax on e-cigarettes.
Credit: Adobe Stock / Luzitanija

The tax, which will take effect July 1, 2022, is split between wholesale and retail, with closed-system products like prefilled pods assessed 25 percent of the wholesale cost, and open-system products like bottled e-liquid being taxed at 15 percent of the retail price (a sales tax).
A previous version proposed a 10 cent-per-milliliter tax on vaping fluid and an additional 10 percent percent excise tax on e-cigarettes and vaping products.
Health advocates say the plan meets their goal of a tax rate comparable to the rate on traditional
cigarettes, according to wibc.com. Indiana State Medical Association president Roberto Darroca says doctors are
particularly concerned about discouraging teenagers from taking up vaping so they don’t get a
taste for nicotine and move on to traditional cigarettes.
April 23, 2021
Indiana Senate to Vote on 15% E-liquid Tax Today
The budget deal awaiting a final vote in Indiana today includes the state’s first-ever tax on e-cigarettes. Both the House and Senate had floated an extra 10 percent sales tax on e-liquids, but the final bill jacks that up to 15 percent. Prepackaged closed-pod cartridges like Juul will be taxed at 25 percent at the wholesale level.
Credit: Ken Shelton
Health advocates say the plan meets their goal of a tax rate comparable to the rate on traditional
cigarettes, according to WIBC.com. Indiana State Medical Association president Roberto Darroca says doctors are
particularly concerned about discouraging teenagers from taking up vaping so they don’t get a
taste for nicotine and move on to traditional cigarettes.
The Senate had flirted with the idea of taxing closed-pod cartridges based on the amount of liquid
they contained. Darroca says that would have been a mistake, and says negotiators did the right
thing in basing the taxes on price. Because pod cartridges contain a fraction of the liquid sold for
open systems, Darroca says a volume tax would have blown up the goal of making the vaping tax
comparable to taxes on traditional tobacco products.
The Indiana Chamber had gone farther, blasting the volume-based tax as worse than doing
nothing. President Kevin Brinegar says the Chamber supports the final version as a “big step” for
public health, though he and Darroca both say they’re disappointed the Senate blocked a
proposed cigarette tax hike.
April 22, 2021
Kentucky Ends 15% Wholesale Tax on Vapor Hardware
The state of Kentucky’s General Assembly has voted to remove the state’s 15 percent wholesale tax on vaping hardware when sold separately from e-liquids. The e-liquid will continue to be taxed at 15 percent. That was the intent of the original tax bill, Republican Rep. Jason Petrie of Elkton, sponsor of House Bill 249, an omnibus revenue bill, said at a February committee meeting. He said legislators had been receiving lots of calls about it, and the bill more clearly defines how open “vaping” systems should be taxed.
Last March, when the Senate Appropriations and Revenue Committee passed a trimmed down version of a House bill to tax e-cigarettes for the first time in Kentucky, Sen. Chris McDaniel, R-Taylor Mill, said the hardware should only be taxed at 6%, according to the Times-Tribune. Ultimately, the 15 percent tax on open systems, including both hardware and solution, and a $1.50-per-pod tax on closed vapor cartridges were added to the revenue bill and became law.
A fiscal statement attached to this year’s bill notes that Kentucky started taxing vaping products in August 2020 and has generated about $1.5 million per month from the levies. It says about $1.4 million per month comes from taxes on closed systems, like those sold by Juul Labs, and about $185,500 per month on the open systems, which are typically sold in “vape” shops. The report says removal of the 15 percent separate-hardware tax will cost $243,750 in revenue. That’s a relatively small amount, but health advocates were not happy with the change.
“Removing the tax on open vaping system devices reduces tax revenues at a time when Kentucky remains very uncertain about the long-term economic impact of the pandemic,” Ben Chandler, president and CEO of the Foundation for a Healthy Kentucky, said in an e-mail, according to the Times-Tribune. “Moreover, these devices will become the sole tobacco product to escape a state excise tax.”
In contrast, Chandler said, “Only 19 of the state’s 61 local health departments will get funding for tobacco prevention and cessation beginning July 1. We urge the governor and lawmakers to work together to address Kentucky’s continuing tobacco and nicotine addiction problem, which appears to have grown during the pandemic.”
March 30, 2021
Indiana is One Step Closer to Taxing Vapor Products
Indiana is a little closer to placing a tax on vapor products for the first time at $1.56 for a two-pod package. The U.S. state’s legislature also hope to the tax on combustible cigarettes to $2 a pack. A preliminary estimate projects the increase would bring in $278 million.
Credit: Photo Mix
The committee had put off a vote Monday to draft language specifying 40 percent of the money raised — an estimated $112 million — would go to Medicaid, according to Inside Indiana Business. Crown Point Republican Julie Olthoff, the bill’s author, says smoking-related health problems cost Medicaid more than five times that much.
Indianapolis Democrats Robin Shackleford and Greg Porter still voted no. They want all the money earmarked for a new public health fund. Republicans say there’s a separate bill addressing that. Committee chairman Brad Barrett (R-Richmond) notes both bills are headed for the tax-writing House Ways and Means Committee, which will decide where the money goes in the context of the full budget. He says the health committee vote puts the panel on record as urging that the money be spent on health, not just dumped into the state’s general fund.
Brookston Republican Don Lehe also voted no.
Even if the full House passes it, the bill faces a tougher climb in the Senate. In the last five years, senators have killed three bills to either raise the cigarette tax or tax e-cigarettes.
February 8, 2021
Indiana Introduces Annual Bill to Boost Vapor Tax
The Indiana state legislature has begun to debate raising taxes on vaping products … again. The annual introduction centers on a proposed tax rate of $1.56 on a two-pod pack, the equal nicotine content to a pack of combustible cigarettes.
Credit: Davis Mark
Indiana’s traditional cigarette tax of just under a dollar a pack is the 13th lowest in the nation. Legislators are considering a bill to double it, and tax e-cigarettes for the first time, according to an article on wibc.com. Marion County health director Virginia Caine says it’s critical to include e-liquids in the bill.
She says vaping among teenagers has doubled in the last two years, wiping out any progress the state has made in reducing teenage smoking. Recent U.S. CDC reports say that teen smoking rates declined in 2020. Mason Odle, owner of Just Vapors in Fishers, says he fully supports raising the cigarette tax, but argues e-liquids shouldn’t be included.
He contends e-cigarettes are a more popular and effective means of quitting smoking than FDA-approved products like nicotine gum or patches. That brought a fierce pushback from health officials, who point out the FDA has specifically banned vape manufacturers from marketing their product as a stop-smoking aid until they produce more evidence that it works. And Caine says there are serious concerns about lung damage from vaping.
Former Libertarian candidate for governor Don Rainwater argues increasing cigarette taxes would punish store owners at a time when they’re already reeling from the coronavirus pandemic. But the main objection from House Public Health Committee members centered on the lack of a specific plan for the proceeds from the tax. A vote has been put off till next week to add language earmarking the money for health programs.
Governor Holcomb and House and Senate leaders have all said a cigarette tax hike isn’t on their agenda, without flatly ruling out the possibility. The House approved an increase in 2016 and 2017, and a vape tax in 2019. All three times, the proposals died in the Senate.
February 3, 2021
Mississippi Aims to Add Vaping Products to Tobacco Tax
A new bill in the U.S. state of Mississippi aims to add vapor to the state’s 15 percent tobacco tax rules. Senate Bill 2182, authored by Senator David Blount, would define an “electronic smoking device” and add that to the definition of other tobacco products with the additional tax.
Credit: Pieter Van de Sande

“‘Electronic smoking device’ means any device that can be used to deliver aerosolized or vaporized nicotine to the person inhaling from the device, including, but not limited to, an e-cigarette, e-cigar, e-pipe, vape pen or e-hookah,” the bill states. “Electronic smoking device includes any component, part or accessory of such a device, whether or not sold separately, and includes any substance intended to be aerosolized or vaporized during the use of the device. Electronic smoking device does not include any battery or battery charger when sold separately. In addition, electronic smoking device does not include drugs, devices or combination products authorized for sale by the U.S. Food and Drug Administration, as those terms are defined in the Federal Food, Drug and Cosmetic Act.”
Current Mississippi law indicates that cigars, cheroots, stogies, snug, chewing and smoking tobacco and all other tobacco products except cigarettes shall be taxed 15 percent of the manufacturer’s list price. This bill would add electronic nicotine delivery systems (ENDS) to that list.
January 17, 2021