Big victory for vape in Pennsylvania!
Vapers and Vape Shops have won the first round of a battle to keep vape alive in the Keystone State. The House Finance Committee voted yesterday in favour of a bill which will repeal the most regressive tax that has ever been seen in US vaping. But this is only the first round in a battle yet to play out.
Last Monday hundreds of vapers and business owners turned up to the State Capitol for the PATAXPROTEST. The tax is set to force shops to pay the State 40% of the wholesale price of all products from October 1st.
The act was passed in July this year and includes a hideous “floor-tax” provision. This forces all shops to pay PA State 40% of the value of all stock on hand within 90 days. The new bill will see stores paying 5c for every millilitre of e-liquid sold.
Around 50 businesses have already shut up shop ahead of the October 1st effective date, and for many of the other 350 PA vape shops the 40% floor tax will mean instant insolvency.
The tax was designed to bring in $13m of revenue to the State annually. But commentators have suspected a different agenda, given the unlikelihood of raising any money from an insolvent industry.
A conflict of interest
Vaping threatens significant revenues collected by US States on cigarette sales. This key part of the Master Settlement Agreement (MSA), which was agreed in 1998 has led to hideous conflict of interest: it is in the direct fiscal interest of each US state for smokers to continue to smoke cigarettes. Some states, PA included, will face great budgetary issues if significant numbers of people stop buying cigarettes.
The MSA was designed to recompense states for healthcare costs from smoking. Yet not one US State has ring-fenced the money for this purpose, instead putting it into the general budget. In some extraordinary cases future MSA revenues were sold as bonds to fund pet projects of then incumbent politicians.
Vaping threatens the MSA revenue stream as vape increasingly displaces smoking.
So congralutions to PA vapers for winning this first round in changing the local tax regimen to something that might actually be sustainable.