Senate Bill 1124 would amend the Tobacco Product Tax Act of 1995 to include e-cigarettes in the definition of tobacco products. This would apply a 36 percent wholesale tax to all components of vaping products, including “any device that employs a battery or other mechanism to heat a solution or substance to produce a vapor or aerosol intended for inhalation.”
This bill would also tax all e-liquids, “whether or not it contains nicotine intended for use in the device.” Gov. J.B. Pritzker who is pushing the bill, said he hopes that the revenue from the tax would “balance his budget proposal.” On the other hand, harm reduction advocate Lindsey Stroud from the Heartland Institute, like many before her, has pointed out that regulating e-cigarettes as tobacco products, when they are proven to be safer alternatives to tobacco cigarettes sends the wrong message and ultimately does a disservice to public health.
Proposed Taxes in Other States
Right on the heels of news of a proposed 92% e-cig tax in Vermont, last February Utah lawmakers also proposed an unreasonable 86.5% tax on vaping products. Stroud insists that while addressing youth vaping is commendable, draconian taxes placed on tobacco harm reduction (THR) products which would threaten the public health gains e-cigarettes provide, are not.
The harm reduction effects of vaping would ultimately benefit state budgets more than any tax
Stroud has explained that the harm reduction effects of vaping would ultimately benefit state budgets more than any tax. “The reduced harms resulting from the use of e-cigarettes is helpful to state budgets and lawmakers, who continuously grapple with the health costs associated with combustible cigarettes.”
“An analysis that estimated the potential benefits that would occur if all current Medicaid recipients who use combustible tobacco were to switch to e-cigarettes found that Medicaid savings could have amounted to $48 billion in 2012. A smaller study found Medicaid savings “would be approximately $2.8 billion per 1 percent of [Medicaid] enrollees” over the next 25 years,” she added.
Why these Taxes can be Counterproductive
Additionally, explained the harm reduction expert, such taxes will no doubt hurt the local vape industries. “After Pennsylvania passed a 40 percent wholesale tax on e-cigarettes in 2016, an estimated 120 vape shops closed. It is estimated that vape shops “generate annual non-online sales of more than $300,00 per store” and average $26,000 in monthly sales. The proposed legislation would likely drive current and new vapers to turn to internet-based distributors. E-cigarette online sales grew 41.3 percent from 2016 to 2017, from $345 million to $487.7 million,” she explained.