The exact tax increase that the passing of Proposition 56 would bring about remains unclear as it still needs to be decided upon by the state’s Board of Equalization, yet it is suggested to be the “equivalent” to $3.37 on a packet of cigarettes. The proposed tax will only apply on nicotine containing products, and must be paid to the government by the first business who sells it in California, or the first consumer that brings it into the state. Therefore the tax still applies on any products brought from out of state.
The current constitution states that 43% of all newly generated revenue should go to schools, however Proposition 56 tweaks the California Constitution so that the new tax money would go to MediCal, a program that pays insurance companies and hospitals on behalf of low income individuals, this prevents the schools from receiving at least 600$ per annum.
Where will the tax revenue really go?
While the vaping industry may feel slightly reassured by the fact that Californian voters have not supported the idea of a tobacco tax raise since 1998, action is being taken as the California Smoke Free Organization (CSFO), and the Vapor Technology Association, (VTA), have joined forces in order to fight the implementation of this proposition, amongst other things.
In the meantime in Pennsylvania
In the state of Pennsylvania, a similar challenge has been faced, as a new tax of 40% on wholesale value of vaping products was introduced this month. This tax brought with it serious implications as disciplinary action such as hefty fines and even imprisonment would have been faced by non-compliers, such as anyone importing vaping products from out of state.
However, on the 26th of September about 250 to 450 protesters rallied on the steps of the Capitol in Harrisburg, suggesting the passing of compromise bill (HB 2342), a bill put forward by Republican Jeff Wheeland that would replace the 40 percent tax with a five-cents-per-milliliter e-liquid tax. Responsively the House Finance Committee passed Wheeland’s bill, halting the 40% tax pretty much in its tracks. This revised tax will put Pennsylvania on the same page as Louisiana and North Carolina.
Varying tax rates
Around the US tax rates vary widely, for example; 95% in Minnesota, 67% in the District of Columbia, 86% in Utah, 75% in New Jersey, 45% in Washington and 18% in Kentucky, while in Colorado no tax has ever been set in place. At state level, regulators have approximately reviewed 33 separate bills related to vaping products taxation this year.
Whilst many vaping businesses may be daydreaming about moving to Colorado, California’s Proposition 56, is expected to pass, affecting the vaping industry at large a recent survey suggests. On the other hand the passing of HB2342 is a breath of fresh air, as for a change a legislature has allowed a measure that will protect the small local businesses from bankruptcy, and most importantly promote the accessibility of vaping products for those wishing to curb the deadly habit of smoking.