Tobacco

War on Vaping an Effort To Prop up Tobacco Taxes?

New tax bill in California treats vaping products like tobacco products.

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The last time I wrote about tobacco-related measures, I concluded that California legislators and health advocates have let a bit of Puritanism get the better of them. Why else would the governor sign a law that makes no distinctions between smoking dangerous, combustible tobacco products (cigarettes) and puffing on vaping devices that are a safer, alternative product?

I still think some Puritanism is at work—it bothers activists that smokers find vaping enjoyable, as opposed to arm patches, nasal sprays and ten-step programs. But some readers reminded me of an even bigger and more cynical reason for the state's approach: officials are addicted to their cut of tobacco-related revenues. Smoking rates are declining. As smokers give up their bad habit, anti-smoking programs lose tax dollars.

Taking dollars from government agencies and government-addicted nonprofits makes them as grumpy as taking the last pack of cigarettes from a habitual smoker. Even though the state passed several new laws—raising the smoking age to 21 and regulating e-cigarettes like tobacco, for instance—anti-tobacco activists have qualified an initiative for the November ballot that would go even further. The "California Healthcare, Research and Prevention Tobacco Tax Act of 2016" is, as its name suggests, all about hiking tax rates.

California has one of the nation's lower tobacco taxes. The initiative provides a $2 per pack tax boost on cigarettes (from 87 cents to $2.87). It raises taxes on other tobacco products by an equivalent amount. I'm no fan of tax increases. And sin taxes are regressive—they impose a particularly high burden on the poor. But at least advocates are trying to do something that might improve public health by discouraging the use of a dangerous product.

But this line in the initiative suggests the anti-vaping craze is mainly about the money: "Tobacco products also shall include electronic cigarettes." To be clear, the liquid that is heated and "vaped" is not tobacco, even though most—but not all—liquids contain nicotine. The nicotine is the point. Smokers are addicted to it. These products provide a safer way to get that fix—95 percent safer, according to Public Health England. If the initiative passes, the state will have another way to get its fix of taxes. In fact, the measure would boost taxes on vaping products by 320 percent, according to industry estimates.

The Legislative Analyst's Office explains the $1 billion a year in expected new revenues will go to replace lost tobacco-related revenues. A small portion will go to the Board of Equalization to administer the tax. Law enforcement will grab $48 million. The University of California will grab $40 million for "physician training." The Department of Public Health will get a $30-million cut and the state auditor will get some money to conduct audits.

"Many believe this misguided measure is driven more [by] money than protecting California's public health due to the fact that tobacco tax revenues are declining as adult consumption rates continue to fall," Joshua Kane, president of the California chapters of the Smoke Free Alternatives Trade Association, argued in his recent testimony to the Legislature. Only 4.3 percent of the current $1.52 billion in smoking-related excise taxes and settlements actually are spent on smoking prevention and cessation programs, he added.

That reinforces the cynics' view: The government wants its dollars. And so does the tobacco industry, of course. The Los Angeles Times obtained an email from a tobacco lobbyist suggesting the industry would pay up to $10 per signature to place a possible referendum on the ballot overturning the age-21 measure. It would have driven up signature costs and endangered this tax initiative and other proposals slated for the ballot. That's cynical politics, too.

Politics aside, the anti-vaping folks have one reasonable argument. They point to a University of Southern California study suggesting teens who try vaping are six times more likely to start real smoking. "This study, like a number of others quoted as saying that e-cigs are a gateway to smoking, only reflects the difference between teens inclined to experiment and teens not so inclined," argues Joel Nitzkin, a public-health physician and colleague at the R Street Institute. In other words, the "gateway" argument is a weak one.

The tobacco-tax initiative's backers say "an increase in the tobacco tax is an appropriate way to decrease tobacco use and mitigate the costs of health care treatment." It's true that a higher tax discourages smoking. So a higher e-cigarette tax would also discourage vaping, which happens to be a great way to stop smoking. The logic seems inescapable that hiking taxes on vaping products is more about revenue than public health.

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  1. I’m shocked and appalled. You’d mean the state would rather have more money than healthier citizens?

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    2. Start working at home with Google! It’s by-far the best job Ive had. Last Monday I got a new Alfa Romeo from bringing in $7778. I started this 6 months ago and practically straight away started making more than $95 per hour.

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    3. the state would rather have more money than healthier citizens?

      Death and Taxes: Why longer lives cost money

    4. Big Tobacco is the impetus behind an overreaching government.

  2. I’m sure the taxes have something to do with it. Without the funding how am I supposed to watch a woman peel her face off or a guy pull out his own tooth when I’m trying to fucking watch South Park?

  3. I’m no fan of tax increases. And sin taxes are regressive?they impose a particularly high burden on the poor. But at least advocates are trying to do something that might improve public health by discouraging the use of a dangerous product. get more people like Eric Garner killed.

    What CA needs is more people being strangled to death by cops for selling ‘loosies’ due to the economic incentives created by ridiculous sin taxes.

    1. Yeah, that one made me sigh.

    2. I wonder how many white proggie public health types privately were cheering the death of Eric Garner at the hands of the NYPD? I bet a lot were.

    3. I… can’t breathe…

  4. More prog do gooders – cut of the same cloth as those who supported the prohibition of alcohol – for your own good.

    1. That wasn’t really prohibition, it was capitalist market action. Anyway, it would have worked, if we’d had better people in charge and more people on board. Educate the populace, that’s the ticket. Just you wait. It’ll work this time.

  5. And sin taxes are regressive?they impose a particularly high burden on the poor.

    It’s funny how people never care about regressive taxes hurting the poor when it’s sin taxes. It’s almost like they never cared about regressive taxes to begin with and that was all just a cover.

  6. Obviously the solution is a $1000 per pack tax.

    1. It can work as long as we have a 1000.00 per hour minimum wage. Hey, why not?

  7. If you didn’t know at least 2 years ago that the war on vaping was over Tobacco Settlement cash, you haven’t been paying attention.

    Various government bodies and anti-smoking groups rely on settlement cash which comes from cigarette taxes. They saw the writing on the wall and knew they were losing cash and decided that smokers should be permanent tax cattle and will seek to get their cash one way or the other. They don’t give a fuck about smokers’ health; it’s all about the money.

    Fuck them, and fuck the FDA for doing their damndest to make sure they have it, no matter the cost.

    1. “They don’t give a fuck about smokers’ health; it’s all about the money.”

      The WHO has talked recently of an “End Game” for tobacco by 2035. It will be interesting to see if this really happens given how much governments make off of it.

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  11. While the beneficiaries of the tobacco tax are part of the reason why they are looking to include vaping with tobacco, big pharma is a main player in throwing vaping under the bus. They now have competition in the quit smoking arena and losing money as people wanting to stop smoking are not using their products and opting for an e-cigarette instead. Why else would the FDA want control over the juices that do not even contain nicotine or the equipment used for vaping? As to the study saying that the kids are at risk, well, I guess it depends on whose study you want to believe. These people can’t deal with a free market, they have to have a rigged game.

    1. “These people can’t deal with a free market, they have to have a rigged game.”

      Yep-that’s what keeps them employed. There are doctoral programs and institutes dedicated to tobacco control and funded by Bloomberg and Big Pharma. You would think there wouldn’t be as much of a need for them as smoking continues to decline, so they create new “problems” like vaping to guarantee their relevance and paychecks.

  12. The Nicotine Smuggler Enablement Act of 2016.

  13. Fuck off slavers. You will only create a black market for vapers.

    1. Yeah. What he said.

  14. In the real world smoking is a gateway to vaping, this enjoyable alternative is the primary reason that cigarette sales are in decline. It’s no surprise that kids who try vaping also try smoking but I seriously doubt they’ll be smoking when they’re 50 as long as vapes are available. The financial beneficiaries of maintaining a reliable portion of the population who will continue to smoke cigarettes no matter the cost, were caught unaware until revenues began to decline. They’re scrambling to demonize, prohibit and tax vaping in a desperate attempt to protect their revenue streams and prohibitionist industry. As a former smoker of 40 years, thank you again to Reason Magazine for continuing to cover this issue.

  15. War on Vaping an Effort To Prop up Tobacco Taxes?
    New tax bill in California treats vaping products like tobacco products.

    This is a win-win situation for The State.
    It gets more money from the little people. As we all know, Kalifornians are not taxed enough. There are counties and municipalities that are not sucking enough life blood from its inhabitants. There are taxpayers out there that are spending money on frivolous things like food, rent and gasoline. This must stop. Placing a tax on vaping is an excellent way to bleed the unwashed masses dry so state, city and local government “workers” can further pad their bank accounts and accumulate more benefits.
    Secondly, it is always wise to have a government nannies wagging their fingers in our face because all us little people have an IQ of a log and have the emotional maturity of a two year old. Where would we be without government nannies wiping our noses, feeding us, clothing us, wiping our butts and micromanaging our meaningless lives?

    1. I’m surprised that Cali has not tried to tax people who move out of that state to pay for the growing underclasses that remain.

      1. Please do not give them any new ideas.

    2. Well, said! I saw an article not too long ago about how California was considering shutting down it’s preschool/ daycare because funding was low; the funding came from tobacco money. When was this ever part of their screams for money because of smoking??? Well, I guess since there has been no appreciable difference in cancer or other health problems since their bans and taxes, they had to use the money for something, right?

    3. If they can’t buy gas maybe the Great Unwashed won’t make it to the polls to vote libertarian

  16. That Virginia, is a distinct possibility.

  17. It’s always about the “money.” Legislative bodies impose “Sin Taxes” to discourage use of products they are unable to ban outright and then must look for ways to make up the money lost from reduced use of the “sinfull” product because they have gotten used to spending the “sin tax” revenue.
    Congress and the Justice Dept forced a huge settlement from the tobacco industry payable over years that increased the price of tobacco products and reduced demand for them thus lowering tobacco tax revenue. The EPA mandated the auto manufacturers to make vehicles more fuel efficient and to reduce air pollution. The industry complied and modern vehicles product more HP at half the fuel consumption of 50 years ago plus half the gas tax revenue that paid for highway construction and maintenance. EPA mandated electric vehicles have also reduced fossil fuel consumption and tax revenue and yet pay nothing towards highway construction and maintenance.

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  19. CA is looking at what might be a 67% tax on vaping products. Taxation aside, when SB-140 (the bill that inspired this legislation) was introduced by Sen. Mark Leno, his contributors included AstraZeneca (manufacturers of Eolas Orexin-1, an upcoming cessation therapy), GlaxoSmithKline (Nicorette), Kaiser (against vaping in favor of NRT therapies including Wellbutrin), and Merck/Pfizer, the manufacturer of Chantix. So not only do you have pressure to retain taxation from tobacco products, but the anti-smoking “health organizations”, as well as pharma who stands to lose cessation profits, as well as profits from smoking related disease.

    While the FDA acknowledges both the PHE and Royal College of Physicians studies that found vaping to be 95% safer than smoking, we have the FDA deeming regulations where they set out to “decimate 99% of the industry” per the impact report they submitted to the OIRA, set a predicate date for vapor product regulation back to February 2007, and expect a per item premarket tobacco product application fee that could be in the millions. (Per item in this case is every nic strength and flavor, six strengths per flavor and five or six flavors per brand is common, the most conservative estimates the PMTA fee/item at $300k.)

    Vaping is small business, willing to comply with reasonable standards (ISO rated facilities, safe/sterile manufacturing protocols, ingredient restrictions), but have nowhere near the low-ball $10m required to meet compliance.

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