New Study on Electronic Cigarettes Released Today

March 22, 2016

Today, we released a study on tax policy and vapor products (also known as electronic cigarettes). These products have grown in popularity dramatically since their invention less than 10 years ago, so much so that Oxford Dictionaries named the word “vape” the 2014 Word of the Year.

To some, vapor products are an exciting innovation that offers a new, less harmful alternative to traditional incinerated cigarette use. By contrast, tobacco control groups are concerned about youth use of the products.

Policymakers, of course, face challenges as to how these products will be treated with respect to tax policy, as it affects revenues.

The key findings from our report:

  • As of January 1, 2016, four states, the District of Columbia, and three local jurisdictions have enacted taxes on vapor products, but their methods and levels of taxation vary dramatically.
  • In 2015, at least an additional 23 states considered excise taxes on vapor products.
  • Vapor products are generally found to have a much lower risk profile than traditional incinerated cigarettes.
  • Public Health England, housed in the British Department of Health, issued findings that vapor products are 95 percent less harmful than cigarettes and can serve as an effective tobacco-cessation method.
  • Vapor products likely have much lower externalities than traditional cigarettes, and it follows that the excise taxes on the products should be lower or nonexistent.
  • Punitive taxes on vapor products could inadvertently close out options for cigarette users looking to quit.

For the full report including a 50 state breakdown of proposed and enacted taxes, click here.

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