One reason for hiking up taxes on vaping products is to recoup revenue lost from the drop in the sale of traditional tobacco, according to one advocacy group.
States across the nation have either increased taxes on e-cigarette products, or are considering doing so.
Pennsylvania introduced not only a 40 percent wholesale tax, but also a same percentage inventory tax.
But it is not clear yet whether the tax increase made any impact on vaping by youths, the stated reason for its introduction in the state, according to Alex Clark, chief executive of the Consumer Advocates for Smoke-Free Alternatives Association.
“But the reasons often overlooked by the media include filling budget holes and recouping tax revenue that is lost when people who smoke switch to un-taxed products like e-cigarettes,” Clark told Tobacco News Wire.
Clark argued that the 40 percent wholesale tax was enough to pressure retailers to close, but the inventory, or floor, tax pushed many out of businesses. The latter tax is collected on inventory in a store.
“Many shops — mainly 'mom & pop' independents — were just not in a position to absorb the hit,” Clark said, adding that it is not known in 2019 whether the tax has any effect on use by youths.
He added, “We tend to agree that young people will always find a way to get a hold of things they aren't legally allowed to purchase.
“Many people assume that online sales is a driver of age-restricted products getting into the hands of minors, but it's not the only factor.
“We are aware that the recent uptick in use among youth is occurring, predominantly, among white, upper-middle-class teens.”
These teens are less likely to be affected by price, while young people also tend to share devices, thereby distributing the cost, Clark argued.
Clark described the roll-out of the tax, beginning late 2016, as “calamitous and contested,” and that, since, “we've seen changes in the tax proposals around the country.”
“Some states are enacting wholesale taxes that are higher than PA's (California implemented a 62 percent tax on vapor products by ballot initiative in 2016), but doing so without an inventory tax is giving businesses a fighting chance,” he said.
“In other states, lower per milliliter taxes and sales taxes are being agreed to — sometimes in hopes of staving off harsher regulation like flavor bans.
“In any case, raising taxes on smoke-free products puts businesses at a competitive disadvantage to combustible tobacco products that, while still more expensive in the long run, are more visible and can appear to be more or just as affordable as vaping at the point of sale.”
Clark pointed out that placing smoking tobacco products and vaping in the same regulatory, and tax, basket “sends the misleading and inaccurate message to consumers that these products pose similar risks to health.”
