Government Spending

If the FDA Doesn't Kill the Vaping Industry, the Democrats' Tax Hike Just Might

House Democrats' proposed excise taxes could double or triple the price of some vaping products.

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It's been a rough couple of weeks for the vaping industry.

Last week, the Food and Drug Administration (FDA) let a deadline for authorizing vape products pass without having processed millions of pending applications—effectively making those products illegal to sell. Then on Monday, House Democrats unveiled a funding plan for their $3.5 trillion Build Back Better bill that would impose steep new excise taxes on nicotine-containing vaping liquid for the first time.

The hope is that new taxes on vaping products—alongside massive rate increases on traditional cigarettes—will bring in $96 billion in revenue while deterring people from using either.

But vape store owners, already suffering from the FDA's regulatory onslaught, are wondering whether they'll be able to survive the tax hike.

"This is going to more than double, and in some cases triple or quadruple, the price of liquids that I sell," says Keith Gossett, the owner of Bucky's Vape Shop in Columbus, Georgia.

Gossett's most popular products are 60-milliliter bottles of vaping liquid, which come with various nicotine strengths. For a current cigarette smoker looking to transition to vaping, Gossett says he recommends liquids with 18 milligrams of nicotine per milliliter, which he sells for about $15.

Democrats' tax bill would impose a $100.66 excise tax on every 1,810 milligrams of nicotine, adding approximately $60 in taxes to that 60-milliliter bottle of 18-milligram strength e-liquid. The bill is estimated to add about $1 to a pack of traditional, combustible cigarettes.

"I'm going to sit there and try to tell a man with a $6 pack of cigarettes that my [$75] product is better. This tax will close my shop," Gossett tells Reason.

The competitive disadvantage that these new tax hikes would create for vape shops also poses a public health threat by encouraging people to continue smoking more dangerous combustible cigarettes.

One 2014 study published by BMJ found that a 10 percent increase in the price of e-cigarettes resulted in a 19 percent drop in sales. Another 2019 study, published by the National Bureau of Economic Research, found equalizing federal taxes on traditional cigarettes and electronic cigarettes would deter 2.75 million people from quitting smoking.

"Would-be switchers have been shown to be very price-sensitive, while cigarette smokers often continue to use even in the face of very large tax increases," says Greg Conley of the American Vaping Association.

The new taxes would keep people smoking, he says, while creating even more uncertainty for an industry already facing the threat of regulatory extinction.

Before nicotine-containing vaping products can be legally sold in the U.S., they have to receive "premarket authorization" from the FDA. Getting the agency's authorization is a long and expensive process that, as Competitive Enterprise Institute's Michelle Minton notes, requires separate applications for each "product, nicotine level, flavor, and even bottle size."

Last Thursday, a grace period during which the FDA would hold off on any enforcement action while it processed these applications ended, meaning millions of vape products available for sale today—including big brands like Juul—are being "marketed unlawfully and subject to enforcement action at the FDA's discretion."

In a statement last week, the FDA has said that it will focus its enforcement on companies whose products have been explicitly rejected by the agency, or who haven't submitted applications at all.

Still, as Reason's Jacob Sullum wrote, "the agency, despite its promises of regulatory flexibility, is perpetuating a situation in which companies that tried to play by the rules have no idea whether they will still be in business next week, next month, or next year."

Gossett says that one of his suppliers has already told him they were closing up shop now that the FDA's deadline had passed.

In an attempt to route around these FDA restrictions, some vape manufacturers have started transitioning to making synthetically derived nicotine products, which are theoretically outside the agency's powers to regulate tobacco products.

That's an untested legal theory, however. It also wouldn't exempt these products from the potentially fatal taxes included in the House Democrats' bill.

"This tax is not going to deter people from using nicotine, it's just going to turn that person from a vaper back into a smoker," says Gossett. "This tax will not only kill my business, it will kill Americans."

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  1. “This is going to more than double, and in some cases triple or quadruple, the price of liquids that I sell,” says Keith Gossett, the owner of Bucky’s Vape Shop in Columbus, Georgia … “This tax will not only kill my business, it will kill Americans.”

    Yeah, well, the modern Democratic Party doesn’t care about small business owners. It knows its base consists of the billionaires behind the largest businesses — Bezos (Amazon), Zuckerberg (Facebook), etc.

    #IfYourBusinessWasAnyGoodItWouldntBeSmall

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  2. Remember when lots of people smoked, and then died of lung disease and cancer. Good times. More deaths than from Covid and yet they did it anyway.

    There’s a part of me that misses the days when people just fucking died and nobody worried they just moved on with their lives. Now we keep them alive into their 80s or longer, and some of them still serve in Congress like vampires.

    1. I very much miss my dead friends and family, and there’s no guarantee we’ll meet again after death, so I’m in no hurry to join them.

    2. We should mandate heavy smoking for everyone in Congress.

      1. I am a proponent of term limits, followed by public execution at a large harvest festival. After which, ritual rendering of the body into fertilizer and spreading upon the fields. For the children, naturally.

  3. No, the taxes will save the vaping industry. Same as for pot, liquor, and gambling, the proven way to getting and keeping an activity legal is to cut the public fisc in on the action.

  4. Better millions in tribute than that drops of blood be spilled.

    Party A has the ability to destroy Party B, and Party B has no ability to do the same to Party A. Isn’t it best for all that Party B pay Party A to be allowed to stay in business? Then everybody’s happy, and nobody’s destroying anybody else, because the business is in both parties’ interest. We’d still have liquor prohibition and all its attendant crime if states hadn’t realized they were keeping the gold mine closed. We wouldn’t’ve been getting cannabis legalized if states weren’t similarly profiting. Same with various forms of gambling. It’ll happen some day with prostitution too.

  5. To put it yet another way, taxes are the price we pay for not being killed.

  6. So cigarettes will still be cheap and plentiful, but the safer alternative will be nuked from orbit.

    Makes perfect sense, to a certain kind of idiot.

  7. Black market for the win. Increased deaths from tainted product, they don’t give a shit. Increased deaths from uptake of smoking, they don’t give a shit.

  8. They’re not trying to kill it.

    Just trying to kill off the small startups who jumped into the vaping industry. To consolidate it under the bigs, like Philip Morris. Much easier to fleece one giant sheep than 1000 little lambs.

  9. Fuck Congress, they are spending junkies and don’t care what they have to do to get their fix.

    Fuck the FDA. Nobody outside of DC asked them to stick their rather large noses into vaping.

  10. I thought they had been quite clear on their desire to kill the vaping industry?

    1. You wouldn’t think that would be such an intuitive, automatic, conclusion…but then I thought about how very many small entrepreneurs have gotten into the field of vaping products and accessories, and remembered my theory that most of our recent economic dislocation has SEEMED to be for the goal of killing off small businesses…and yeah, makes sense.

  11. Assuming the news-media information I’ve consumed over many years is accurate, Health Canada (our version of the U.S. Food and Drug Administration) allowed novelty-flavored vaping products to be fully marketed — even on corner stores’ candy counters — without independent, conclusive scientific proof that the product (as claimed by its tobacco-industry creator) would not seriously harm consumers but rather help nicotine addicts wean themselves off of the more carcinogenic cigarette means of nicotine deliverance. Yet, they (i.e. Health Canada) had sat on its own research results that indicated seatbelts would save lives and reduce injury; it said it wanted even more proof of safety through seatbelts before ordering big bus manufacturers to install them in every bus (presumably because of additional cost to bus makers). It applied a double standard, in both cases favoring big business interests.

    Regarding the American FDA, apparently it/they have allowed vaping/e-cigarette regulation loopholes favoring the industry’s sales and profits. I’d wager that is thanks to the potent access corporate lobbyists have to law-makers, governing officials and regulatory agencies.

    On another, though older, questionable product-passage matter, I notably recall the FDA’s then-commissioner Arthur Hull Hayes Jr. had decided (in 1981) to allow the mass consumption of the artificial sweetener Aspartame prior to his leaving the FDA for a lucrative job with the public relations firm owned by the Aspartame patent holder and producer, G.D. Searle Company. Hayes Jr. had overruled a health-expert panel that urged long-term study to ensure the chemical concoction — which was discovered accidently in 1965 while G.D. Searle Company chemist James Schlatter was testing an anti-ulcer drug — wouldn’t cause brain tumors in humans. (Feeding studies had resulted in brain lesions in test animals.)

    Both American and Canadian governances typically maintain thinly veiled yet strong ties to big business and its interests.

    1. Note that former FDA Commissioner Scott Gottlieb is now on the board of Pfizer, which pays its board members a median of $400,000 per year.

      Meanwhile, FDA Director of the Center for Tobacco Products (which last week banned the sale of >99.9% of nicotine vapor products now on the US market) was a lobbyist for GlaxoSmithKline (marketer of Nicorette and Nicoderm) from 2002-2013 (when he lobbied Congress to enact the Tobacco Control Act, which along with, FDA’s 2014 Deeming Rule, is why nearly all vapes were just banned.

      Obama’s FDA, after its 2009 vapor sales ban was struck down in federal court, recruited Mitch Zeller to propose/impose the Deeming Rule, which also will create a multi billion dollar monopoly/oligopoly controlled by the worlds largest cigarette companies.

      By banning most vapes, Zeller also protected dwindling sales of Nicorette and Nicoderm, and Pfizer’s Chantix.

      1. It boggles the mind that anyone considers Board Membership as anything but a fucking bribe. The era of the CEO-Chairman of the Board ushered this in by essentially neutering the Board’s primary role: representative of shareholder interests.

        In the case of the private world, Board Membership usually a bribe to get introductions, investment and partnerships. But with government agents it is quite obviously a way to get crony grift. It is absolutely sickening to see how utterly corrupt our country is getting even as the entire country celebrates the ascendancy of The Party That Fights for the Little Guy ™.

  12. The House Democrat’s proposal to double the federal cigarette tax (from $1 to $2 per pack) would reduce US cigarette consumption about 12%-15% (a huge public health benefit, especially in states with the lowest cigarette tax rates and the highest smoking rates), while generating an additional $9 billion in federal tax revenue. Congress would be wise to enact that tax hike (i.e. for cigarettes) into law.

    But the House Democrat’s proposal to tax very low risk vapor and dissolvable tobacco products (which are 99% less harmful than cigarettes) at the same rate as deadly cigarettes would offset all public health gains of the proposed cigarette tax hike (as fewer smokers would switch to vaping and some vapers would switch back to cigarettes).

    Congressional Republicans should reject the Dems tax on vapes and other low risk smokefree tobacco/nicotine products, while endorsing their $1 per pack tax on cigarettes.

  13. Uh, which constitutional clause authorizes Congress to impose a national sales tax on personal products?

    1. Before the Mic Drop, there was the Commerce Clause.

  14. I’m going to point out the bleedingly obvious: You can always buy a bottle of juice without nicotine and then a bottle of nicotine.

      1. yeah, seems to be
        great idea
        Every night on Tubi they have a PSA about dealing with your addiction to vaping. It makes me want to smash my TV to see the propaganda against a product much safer than cigarettes and probably the most effective way to quit smoking.

  15. Anytime Federal enacts Nazi-Laws (UN-Constitutional) just don’t abide. It’s time to rebel the “Power-Mad” out of the Nazi-Regime. They don’t *own* you whether they like to pretend they do or not. Just tell them to F-Off.

  16. How do we screw over people who quit smoking and are enjoying something that is not affecting anyone else???? Let’s tax the crap out of it. It’s the Democrat way. They will tax the poor, working, and middle class to death while leaving the rich unscathed as they chant eat the rich. I cannot stand people who are educated and easily manipulated. In my book I call that STUPID.

  17. As would be expected, and as is not mentioned, those most impacted by the DNC’s proposed tax increases are the people they claim to support, the people they claim their opponents are trying to kill. Data shows (https://pubmed.ncbi.nlm.nih.gov/34297103/) that trans folks are fairly heavy users of vape products, so one can say that the DNC is erasing trans lives with this, literally killing them /sarc. The genderfluid pronoun weirdos are also vapers, if team blue wants their vote, maybe ask before dry-sodomizing them. To round it out, ethnic minorities, the disabled, working class/poor (who can budget it), you name a group that the democrat party doesn’t pretend to speak for, they all are vaping, because the health benefits are real. Much like banning or taxing flavored cigarettes, this is another racist, classist move from team blue.

  18. Thx a lot for this article!

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