As much as 98 percent of vaping products sold in the US are illicit. Most states levy an excise tax on vaping products, but these tax systems vary substantially. The result is a messy tax system covering largely illicit products, and no one knows whether taxes are being collected and remitted on most products sold nationwide.
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The vaping industry has grown rapidly in recent decades, becoming a well-established product category and a viable alternative to cigarettes for those trying to quit smoking. US states levy a variety of tax structures on vaping products.
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Two pieces of tobacco legislation in Michigan have the potential to decrease state tax collections by $320 million per year, deter smokers from switching to less harmful products, and increase illicit trade and crime.
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Step into the shadows of illicit trade where taxation, incentives, and criminal networks intersect to fuel the lucrative cigarette smuggling market.
If the policy goal of taxing cigarettes is to encourage cessation, vapor taxation must be considered a part of that policy design.
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The potential for alternative tobacco products to save lives is clear and well established. The framework described in this paper uses a scientific approach to tax strategy that will both reduce harm and create a reliable revenue stream for public expenditures.
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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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At least 32 notable tax policy changes recently took effect across 18 states, including alterations to income taxes, payroll taxes, sales and use taxes, property taxes, and excise taxes. See if your state tax code changed.
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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.
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If the policy goal of taxing cigarettes is to encourage cessation, vapor taxation must be considered a part of that policy design.
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Although the majority of state tax changes take effect at the start of the calendar year, some are implemented at the beginning of the fiscal year. Fourteen states have notable tax changes taking effect on July 1.
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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.
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A proposal to introduce a wholesale tax on vapor products in Alaska could make switching from combustible tobacco products very expensive for smokers.
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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.
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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.
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Thirteen states have notable tax changes taking effect on July 1, 2021, which is the first day of fiscal year (FY) 2022 for every state except Alabama, Michigan, New York, and Texas. Individual and corporate income tax changes usually take effect at the beginning of the calendar year for the sake of maintaining policy consistency throughout the tax year, but sales and excise tax changes often correspond with the beginning of a fiscal year.
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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.
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Several states are considering introducing or increasing taxes on vapor products to make up declining tax revenue from traditional tobacco products or to fill budget holes in the wake of the coronavirus pandemic. However, lawmakers should approach the issue carefully because flawed excise tax design on vapor products could drive consumers back to more harmful combustible products like cigarettes.
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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.
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