A group of researchers including US leading tobacco economist Michael Pesko, 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.

As expected, the compiled data indicated that the burden of vape taxes is felt mostly by consumers given it results into higher consumer prices. Moreover, found the study, 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.

On a similar note, in a recent episode of RegWatch, tobacco control experts Dr. Kenneth Warner and Cliff Douglas discussed Canada’s imminent national excise tax and its likely ramifications. The tobacco control experts reiterated that this will likely translate into a massive public health blunder.

Increased vape taxes are directly proportional to increased smoking rates

Another recent study published in the Journal of Risk and Uncertainty, looking at the effects of traditional cigarette and e-cigarette tax rates on adult tobacco consumption rates, found that increased tax rates on vaping products are directly proportional to increased smoking rates.

The study titled, “The effects of traditional cigarette and e-cigarette tax rates on adult tobacco product use,” analysed the effects of taxes on traditional cigarettes and vaping products, on use patterns of these same products among adults in the United States. The researchers examined data from the Behavioral Risk Factor Surveillance System and National Health Interview Survey (NHIS), over the period from 2011 to 2018.

The research found evidence that higher taxes on traditional cigarettes reduce adult smoking and increase adult e-cigarette use. Similarly, higher e-cigarette tax rates increased traditional cigarette use and reduced vaping.

“Cross-tax effects imply that the products are economic substitutes. Our results suggest that a proposed national e-cigarette tax of $1.65 per millilitre of vaping liquid would raise the proportion of adults who smoke cigarettes daily by approximately 1 percentage point, translating to 2.5 million extra adult daily smokers compared to the counterfactual of not having the tax,” read the study Abstract.

Who actually benefits from tobacco taxes?

Meanwhile, highlighting how damaging unreasonable taxes can be, in 2022, the writer of “Firebrand: A Tobacco Lawyer’s Journey,” revisited what he coined “the tobacco paradox,” and revealed how high taxes actually actually benefit none other than the tobacco industry itself.

Over a decade ago, writer Joshua Knelman had had a chance encounter with tobacco lawyer Max Krangle at a Toronto bar, and over the course of their conversation he quickly learned how little he knew about the tobacco industry. This led to him to writing the book Firebrand: A Tobacco Lawyer’s Journey.

You’ve gone from a dollar a pack to $18 a pack over 40 years mostly through tax increases, but every time the tax goes up, the manufacturer gets a few pennies more by piggybacking on the tax increase.Max Krangle, Former Tobacco Lawyer

The book discusses “the tobacco paradox” how the tobacco trade thrives thanks to factors which mean to stunt it, such as well meaning No Smoking signs, which provide free advertising for an industry which is not allowed to promote itself.

In another recent meeting Knelman, Krangle highlighted that restrictions imposed by the world’s governments have been advantageous to the industry. “I don’t know of any other industry in the world that can take manufacturers’ price increases once a year, sometimes twice a year, and get away with it by blaming it on a third party,” he explained.

When Knelman asked whether taxes had the same effect, Krangle replied with a resounding yes. “Yes. That’s exactly what’s happened, in Canada and many other countries. You’ve gone from a dollar a pack to $18 a pack over 40 years mostly through tax increases, but every time the tax goes up, the manufacturer gets a few pennies more by piggybacking on the tax increase.”

Similarly, a study from the UBC Sauder School of Business, found that while tax hikes on a said product can encourage people to stop purchasing it, there is a significant variation with regards to who actually suffers the consequences.

How about taxes on cigarettes? Do they work?

Titled, “Investigating the Effects of Excise Taxes, Public Usage Restrictions, and Anti-smoking Ads Across Cigarette Brands,” a 2021 study found that tax hikes can disproportionately favour bigger brands, while tightened restrictions can hurt them.

To conduct the study, the researchers examined U.S. cigarette sales data from 2005 to 2010, and retail scanner data from 2006 to 2010. Additionally they analyzed a comprehensive data set that comprised of state-level cigarette taxes, state-level smoking restrictions and national anti-smoking advertising campaigns. The research team modeled the smokers’ brands and purchase quantities, and then looked at how the taxes, restrictions and ad campaigns affected their decisions and subsequent choices across different brands and price tiers.

The compiled data suggested that while cigarette taxes decreased smoking rates, they also resulted in a shift in market share towards stronger brands. “The major tobacco brands may be less affected by tax policies because their market power allows strong brands such as Marlboro to absorb rather than pass through increased taxes.”

The Latest Vape Tax Motions in The US

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