Federal lawmakers are considering a tax on e-cigarettes and vape juices to help fund the Build Back Better Act (BBB).
Vape Tax Politics
It is surprising that the Democrat dominated lower house is so willing to embrace a regressive tax that will punish the marginalized groups that will be disproportionately impacted and threatens drive former traditional nicotine users back into the waiting arms of legacy nicotine.
It is unclear if the GOP, angling and favored to take over the House in 2022, is willing to stand by and allow a tax increase. The Democrats hold a slender 218 to 210 edge in the House, and a swing of five votes can kill any bill.
Vaping and nicotine are not popular hobby horses for politicians. But the GOP has plenty of talking points about over-regulation and employment. This bill threatens to destroy jobs, and the small businesses that make up the independent vaping industry. Looked at from a non-partisan manner, this will fail to generate consistent revenue. Almost every previous “Sin Tax” in the US has been a dismal failure and not generated the revenue anticipated.
Vape Tax Revenue
In its current form, the new Federal Vape Tax is expected to generate $96 billion in revenue. These projections are almost certainly optimistic if previous sin taxes are any indication. Sin taxes are extremely regressive in nature. Regressive means that the poorest pay the same rate or more than the wealthiest. In this case, not only is the rate the same for all income brackets but the wealthiest Americans have long since given up on smoking and vaping. The goal is to Build Back Better on the backs of those in no position to pay.
Apart from financial hardship, in the form of the increased cost of vapes and jobs lost as sales revenue is diverted to the federal government or traditional nicotine manufacturers, the vape tax is just poor policy.
Contemplate the efficacy of the War and Drugs, Prohibition, Soda Taxes, and similar initiatives. At EJuices.co, we have no interest in selling our products to youth or adults who do not currently smoke or vape. We offer a wide range of nicotine options to match the needs of our adult customers.
How Much is the Nicotine Tax?
The proposed nicotine tax will be imposed at a rate of $50.33 per 1,810 milligrams of nicotine. This rate of taxation more than doubles the price of a typical 25mg nicotine strength salt nic juice. This form of vaping is the primary threat and top alternative to legacy nicotine’s closed pod systems and strangle hold on convenience store sales.
A 6mg max-VG juice would also suffer a 40 percent price hike. If you are a DIY vaping hobbyist who makes your own juices, wholesale nicotine will be hit by far the hardest.
The vape tax would be added to any already extensive list state and local vape taxes. It compounds the impact of the PACT ACT, a law seemingly designed to kill the independent vaping industry and force adults seeking cigarette alternatives to turn to the C-Store products sold by these same tobacco companies.
Please visit CASAA to help fight the Vape Tax.
Conventional Tobacco Wins Again
One likely result of the federal vape tax is that legacy nicotine would see many prior traditional nicotine users return to traditional nicotine ingestion methods. An optimist might hope for an alternative outcome, namely that current adult vapers will reduce their consumption. This outcome could be considered ideal, but it would also mean that the anticipated revenue from this tax hike will not hit projections.
For those who bite the tax bullet and continue to vape, conventional tobacco industry manufactured vape products will superficially appear to be a better bargain because they contain less e-liquid and the resulting tax increase would be far lower.
It takes 11 boxes of Juul Pods to equal a single 30ml nicotine salt bottle. Paying a huge tax increase over 11 installments will seem less painful to many consumers. The fact that the bottled e-liquid costs the user hundreds less a month to vape will be buried beneath a one-time tax payment that many vapers are not in position to pay.
Vape Taxes Punish Marginalized
Not only are Sin Taxes regressive but they do not work. In the case of the vape tax, it also torpedoes President’s claim that the Build Back Better Act (BBB) will not raise taxes on anyone making less than $400,000 per year.
The vape tax will be shouldered almost entirely by individuals making far below this threshold. As reported in a Washington Post feature, wealthy Americans stopped smoking decades ago. Marginalized groups, rural Americans and lower socioeconomic groups are statistically shown to be the demographics most likely to vape.
Vaping in LGBT Community
A study by the CDC found that 20.3 percent of adults who identify as lesbian, gay, or bisexual use traditional nicotine ingestion methods, versus an overall rate of 14 percent. Bisexual women are over twice as likely to smoke as heterosexual women.
The LGBT population in the US is three times more likely to use electronic cigarettes: 7.5 percent versus 2.6 percent. The smoking rate in the LGBT community is responsible for 30,000 excess deaths annually and leads significant health disparities.
Vaping in the African American Community
A study conducted by the International Journal of Environmental Research and Public Health examined the racial and ethnic differences among e-cigarette users. What they found was shocking at a time when the myth that vaping is a gateway to
traditional nicotine ingestion methods still had adherents: African Americans are more likely to embrace e-cigarettes as an alternative nicotine source than Whites and Hispanics.
The study also found Black Americans were more likely avoid dual use of
traditional nicotine ingestion methods and e-cigarettes. Access to independent vape shops in the rural south and urban core of the north is already limited. For many Black Americans, their access to alternative nicotine solutions will be dictated by PACT Act restrictions and the whims of local convenience store owners. And of course, the purchase of these vaping products will be greeted with a new tax, incentivizing a return to conventional products.
Vaping Beats Nicotine Replacement Therapy
A study by the New England Journal of Medicine (NEJM) found e-cigarettes to be approximately twice as effective as traditional nicotine replacement. Critics of the study were concerned that the traditional nicotine users that moved to vaping may have continued to use traditional combustible tobacco products too.
This complaint is a classic example of moving the goalposts. For one thing, it demolishes the outmoded myth that vaping was a gateway to combustible tobacco products. The revised version of this ridiculous notion, namely that vaping merely supplements traditional nicotine consumption and everyone is a dual use nicotine addict, is also destroyed by this study.
But if one were inclined to engineer a method that convinces current vapers to switch to traditional combustible tobacco, massively increasing the price of vaping products would be an extremely effective method.
Funneling Vapers to Traditional Tobacco Products
Every salvo unleashed at the vaping industry over the last year has seemingly targeted smaller and independent businesses while leaving legacy owned operations unscathed.
We are only a year removed from the PACT Act, which targeted smaller vape shops and online retailers like a laser guided bomb and forced many of their former customers to switch to the tobacco flavored products churned out by the tobacco giants.
Now that so many former customers of vape shops are forced to shop at convenience stores, we have a tax on nicotine e-liquids. The BBB Tax seems expressly constructed to shift these customers over one shelf to combustible tobacco products.
Vaping’s Potential Suppressed
Ex-FDA chief Scott Gottlieb, not an ally of the vaping industry, argued repeatedly that it would be a net positive if every traditional nicotine user switched to vaping. Even in FDA press releases lamenting the increase in teen vaping, he argued the benefits of vaping should be explored:
We saw a chance to leverage the potential benefits of new and non-combustible technology to allow more adults to get nicotine from sources that could pose a lot less harm than smoking cigarettes. We continue to believe in this central concept.
Anti-Vapers
This view is obviously not shared by lawmakers. The goal of universal nicotine abstinence, or the use of the pharmaceutical nicotine replacement therapy products that were soundly beaten by vaping in the NEJM study, is admirable on paper.
But in the influential circles frequented by Michael Bloomberg, whose $160 million in funding has put the vaping industry’s future in the hands of a one man with an agenda, are there any other risky adult behaviors where total abstinence is suggested as the only solution?
Or would such outmoded view of humanity and vices get you laughed out of the room? The anti-vaping mindset is strong. Consider San Francisco, a city once noted for harm reduction and compassion. In 2018, they outright banned flavored vape products.
At the same time, safe injection sights staffed by nurses for intravenous narcotics users are currently approved. New York City has followed a parallel course. Interestingly, the mysterious lung ailment of 2019 that was traced exclusively to cannabis cartridges with vitamin E acetate did not result in a ban on those vaping products. The CDC did not find vitamin E acetate in a single sample of commercially available nicotine vape juice as it does not work with a VG/PG formula, a fact which was known from the start but not widely discussed.
Between the PACT Act, flavor bans, and new taxes, there are three options being presented to vapers. One is nicotine abstinence. The second option is less effective methods of nicotine consumption, e.g. gums and patches. The final option has been made more likely with the nicotine tax: Transition back to combustible tobacco products.
State Flavor Bans
The war on vaping started at the state level with counterintuitive flavor bans. Scott Gottlieb blamed Juul for the teen vaping epidemic and there is no disputing that Juul flavored pods (followed by Juul Mint pods) made up the majority of sales to minors. Closed vape pod systems in general were the catalyst.
Yet it is impossible to find an anti-vaping press conference that does not include a box of colorfully labelled max-VG juices as a featured exhibit. This style of e-liquid, consumed in loud and thirsty vape mods, are the opposite of discrete. Mods are loud. Max-VG juices generate a lot of vapor and flavor. The whole package is not easily hidden, and they use lower nicotine e-liquid. You must throw some serious clouds to match the potency of even the lower strength salt nic pods, all while puffing away on a mod that can be heard through the walls in an adjacent room, let alone a toilet stall.
Flavor bans exclusively benefit legacy nicotine companies without addressing underage vaping. Adult vapers overwhelmingly prefer sweet dessert, fruit and beverage vapes. Removing the vapers’ preferred flavors will make it more likely that adults will switch back to combustible tobacco. But this is just speculation. What is not speculation is that legacy nicotine exclusively sells tobacco (and menthol) flavored e-liquids. They are not impacted, and rival products are forced from the market.
Final Thoughts
The same month the UK proposed a prescription vape program, which use taxpayer money to subsidize getting e-cigarettes into the hands of traditional nicotine users, the United States proposed a tax on nicotine that hit e-liquids.
In the US, Senators with no knowledge pressure scientists at the FDA to ban whole classes of vape juice flavors while the National Health Service in the UK hosts a website titled Using E-Cigarettes to Stop Smoking.
There is an adage known as Hanlon’s Razor that states: “Never Attribute to Malice that Which is Adequately Blamed by Stupidity.” Unfortunately, this rule of thumb only takes us so far when every proposed tax, regulation, vape ban, and law seems aimed at the heart of the independent vaping industry and leaves legacy nicotine and their e-cigarette subsidiaries unscathed or in an even more advantageous position.