How the Democrats tax proposal affects Minnesota
On Monday, Sept. 13, House Democrats released their tax proposal, which is supposed to pay for their $3.5 trillion spending plan. Among other things, the proposal raises the corporate tax…
In May this year, Jama Pediatrics published research online showing that San Francisco’s decision to ban the sale of flavored electronic tobacco products nearly doubled youth smoking rates.
Just recently, the National Bureau of Economic Research (NBER) published a working paper showing that tax hikes on e-cigarettes have similar results. According to the study, while taxes on Electronic Nicotine Delivery Systems (ENDS) were found to reduce the use of such products, they encourage youths to substitute to smoking.
This is not too surprising.
Economically speaking, electronic tobacco products and traditional cigarettes are substitutes. Consequently, any policy that increases (decreases) the cost of obtaining e-cigarettes compared to combustible cigarettes would discourage (encourage) smokers from switching to e-cigarettes.
Tax hikes on e-cigarettes increase the cost of obtaining e-cigarettes compared to traditional cigarettes and thus discourage switching. Prior evidence indicates that when Minnesota imposed a 95 percent wholesale tax on vapor products when they were first introduced, more than 30,000 smokers were deterred from quitting cigarettes and transitioning into e-cigarettes.
Nicotine, however, even though it is an addictive drug, is not a particularly harmful drug. According to the FDA, “it is the mix of chemicals” from tobacco and tobacco smoke that “causes serious disease and death in tobacco users, including fatal lung diseases, like chronic obstructive pulmonary disease (COPD) and cancer” and not nicotine itself.
Other tobacco products like electronic cigarettes, since they do not employ combustion, produce little to no toxins compared to smoking. In fact, studies have estimated e-cigarettes to be as much as 95 percent less harmful than traditional cigarettes.
Policymakers need to take a pragmatic approach to electronic tobacco products given all the evidence showing that policies intended to reduce e-cigarette use only encourage more smoking.