Alaska’s Senate Bill 89, would have set in place a 25% wholesale tax on vaping products and raised the legal age to purchase vapes to 21. This was the third time that Sen. Stevens tried to set in place a vape tax, only to have it vetoed by Gov. Mike Dunleavy.
In 2022, Senate Bill 45 would have added a 35% percent wholesale vape tax. Dunleavy had made it clear in his letter to the Senate that he opposed the tax “…a tax on the people of Alaska is not something I can support.”
In fact discussing the vape tax set across the border in Canada, (at $5 for the first 10mL in any sealed container, and $1 per 10mL for additional liquid in the container), the Canadian Vape Association (CVA) has recently said that it removes an incentive for those smokers who are trying to quit by switching to a safer and cheaper alternative. The CVA added that vaping being more affordable is one of the advantages smokers take in consideration when deliberating switching.
On a similar note, in a recent episode of RegWatch, tobacco control experts Dr. Kenneth Warner and Cliff Douglas discussed Canada’s imminent excise tax and its likely ramifications. The tobacco control experts explained why the nationwide excise tax could be a massive public health blunder.
Meanwhile, Hawaii has just passed Senate Bill 975, which similarly to bill proposed in Alaska, taxes vaping products in the same way as other tobacco products. The bill will now be passed to Gov. Josh Green for his signature and if approved will go into effect on July 1st.
What do data tell us about the impact of tobacco and vape taxes?
Studies keep indicating that higher vape tax rates increased traditional cigarette use and reduced vaping, and vice versa.
A recent study analysing the effects of a possible tobacco tax in Argentina by simulating it, found that the increase may shift jobs from tobacco-related sectors to other sectors of the economy, whilst having a positive impact on public health. The study concluded that the benefits of such a tax far outweigh any repercussions.
On the overhand, in 2020 a group of researchers led by US leading tobacco economist Michael Pesko, found that setting a tax on vaping products just leads to an increase in cigarette sales. The research team tracked the weekly sales of a large percentage of national retailers and the total sales among drug stores, food stores, dollar stores, club stores and mass merchandisers.
The compiled data indicated that the burden of vape taxes is felt mostly by consumers as the tax tends to be translated into higher consumer prices. Moreover they found, this increase in retail price meant that most vapers reverted back to purchasing cigarettes. “Our study finds that for every one Juul-sized e-cigarette eliminated as a result of an e-cigarette tax, 1.9 packs [of cigarettes] are purchased instead,” said Pesko.
Vapes and cigarettes are economic substitutes
A later study co-authored by Pesko, “The effects of e-cigarette taxes on e-cigarette prices and tobacco product sales: Evidence from retail panel data,” reported similar findings. Using the NielsenIQ Retail Scanner Dataset (NRSD) over the years 2013 to 2019, the paper provided evidence of the effects of vape prices on cigarette sales. It reiterated that the products are economic substitutes and that an increase in consumption of one decreases the consumption rate of the other.