Why Vape Tax is a Certainty
It’s going to happen. That dreaded feeling that something is too good to last is unfortunately true. There will be a vape tax; it’s inevitable. The question is when and how much.
There has been lots of discussion about upcoming federal regulations and expected taxation. Yet it could happen on state or local levels well before federal laws go into effect. The possible revenue stream is too big and too tempting to ignore.
Vaping vs. Tobacco Sales
The tobacco industry is still huge. Estimates put sales at or close to $100 billion a year. Currently, e-cigs generate somewhere between $1.5 and $2 billion a year. Those hardly seem like threatening numbers, but e-cigs are still relatively new. If the big tobacco companies are on edge, and they are, something is definitely up.
One report states that cigarette sales have fallen nearly 30 percent from 50 years ago. Part of that is due to health campaigning; however, those who vape nearly doubled from 2010 to 2011, and the numbers tripled between 2011 and 2014. Some studies suggest teen use tripled from 2013 to 2014, and the number of youths using traditional cigarettes has also steadily declined.
Some estimates show e-cig sales reaching $10 billion in just a few years and predict that they will surpass traditional cigarettes within 10 years. With growth expected to rise between 24 and 25 percent annually through 2018, it might happen.
A 30-percent drop in tobacco sales means significant declines in tax revenue for various levels of government, and they’re worried. Officials decry the dangers of smoking, yet they also count on revenues from those who continue the habit. Now the same thing is happening with e-cigarettes. Opponents holler about dangers to youth and about public health interests, but they definitely want that new revenue stream.
Minnesota already treats e cigarettes like tobacco products, and several other locations are currently eyeing the untapped market. In New Jersey, Governor Christie wants to tax e-liquid at the same rate as a pack of cigarettes. Will the state consider one bottle of e-liquid as one pack? If so, what size? Or will they try to calculate equivalents?
Some vapers have estimated that a 30 mL bottle of e-liquid equals two to three cartons of cigarettes. New Jersey currently charges $2.70 tax for each pack. At 10 packs per carton, one 30 mL bottle could cost $54 to $81 in tax alone. This is just one example. States have widely varied cigarette taxes, and some are significantly lower than New Jersey’s.
Some officials don’t want to set lower vape tax rates because it implies that they’re safer than tobacco. Evidence increasingly says they are, but that doesn’t seem to matter. Retail shop owners are also worried, fearing their own revenue losses if taxes are set too high. Whether from cigarettes or e-cigs, states will get their revenues; everyone else is on their own.