Taxation plays a key role in driving illicit trade. People respond to incentives, and sizable price markups for legal cigarettes create incentives for tax avoidance.
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Later this week, the European Union is expected to release a new Tobacco Tax Directive, the first update in more than a decade. Early reports indicate that the EU will propose a significant increase to the existing minimum cigarette tax rates levied across the Union and expand the product categories that are taxed, including a block-wide vaping tax.
Lawmakers in Washington need not revisit their vapor tax. The current tax is levied at an appropriate level and it has the right tax base.
A proposal to introduce a wholesale tax on vapor products in Alaska could make switching from combustible tobacco products very expensive for smokers.
In an effort to raise roughly $100 billion, the House proposal would double cigarette taxes and increase all other tobacco and nicotine taxes to comparable rates—a strategy with severe unintended consequences.
House Democrats’ newly released $3.5 trillion tax legislation includes a tax increase on tobacco, nicotine, and vapor products levied on tobacco manufacturers. But ultimately it would fall heavily on tobacco consumers—many of the group that earns less than $400,000 that President Biden pledged would not see a tax increase.
Early signs indicate that flavors bans will not decrease tobacco consumption. It is not in the interest of the District of Columbia to pursue a public health measure that merely sends tax revenue to its neighboring jurisdictions without improving public health.
In West Virginia, both Senate Republicans and Gov. Justice have offered proposals for reductions to the state’s income tax. In both of the proposals, excise taxes on tobacco and nicotine products are part of the pay-fors that are supposed to make up revenue lost due to lower income tax rates.
West Virginians would face extraordinarily high taxes on vapor products in state if Senate Bill 68 becomes law. The bill would increase taxes on liquid used in vapor products from 7.5 cents per milliliter (ml) to $1 per ml—an increase of over 1,300 percent.
The Tax Foundation’s “State Tax Policy Boot Camp,” is ideal for anyone interested in gaining a better understanding of state taxation.