Politics & Policy

Vaping for Tax Freedom

The Vapor Shark store in Miami, Fla. (Joe Radle/Getty Images)
E-cigarettes have exposed the fraud of public-health advocates.

For years, people claiming to be public-health advocates have pushed for higher tobacco taxes. They argued that if you were to increase taxes on tobacco, consumers would be forced to kick their unhealthy habits and quit smoking cigarettes. And if you continued to increase prices, you could continue to accomplish the same results over and over again. In fact, over the past 13 years, federal and state governments have increased cigarette “sin” taxes more than 120 times. Smokers who didn’t quit were forced to fork over more and more, providing sizeable amounts of revenue to growing governments.

But recently, public-health do-gooders have found a new target for tax increases: e-cigarettes and vapor products. This new fight has exposed the movement for what it always was: nothing more than an attempt to extract more money from consumers. This was clear when President Obama violated his “firm pledge” not to raise any form of taxes on people making under $250,000 per year just 16 days into his presidency by signing a 156 percent increase in the federal cigarette tax. The do-gooder movement was never about public health; it was always about money.

Since 1998, governments have collected more than $500 billion in cigarette taxes and payments from smokers. In 2013, Master Settlement Agreement (MSA) payments and taxes helped the government rake in nearly $44 billion. No such punitive tax regime exists for e-cigarettes. Each time a smoker picks up an e-cigarette in Michigan, the state loses $2, and the federal government loses $1.01 per pack; in Illinois, $1.98; and in New York, $4.35. It adds up quickly, and for big spenders in state capitols, that’s a problem.

This potential for significant revenue loss is driving some legislators mad. State governments are addicted to smoking. Their extreme reliance on tobacco revenue has made them the single biggest beneficiary of America’s smoking habit. Nearly all tobacco revenue that was supposed to be spent persuading people to quit smoking has been spent on anything but. It went to new transportation projects, teacher raises, public-employee pensions, and a long list of special interests. The same people who spent years demonizing smokers and cigarettes turned around and gleefully pushed for new programs and spending projects with the revenue they were able to extract from consumers.

Now many states are at a crossroads. They realize they can’t continue to raise cigarette taxes, because people increasingly purchase cigarettes across state lines, turn to the black market, or are quitting altogether. Budgets, though, rely on this significant revenue stream. Here the fraud that has always been the public-health push for cigarette taxes is exposed, in their quest to tax e-cigarettes out of existence.

In 2014 alone, more than 15 states considered applying the cigarette or Other Tobacco Products (OTP) tax to e-cigarettes and vapor products. In Washington, legislators considered imposing a 95 percent tax on the products. In Ohio, Governor Kasich proposed increasing taxes on e-cigarettes by 700 percent. Fortunately, efforts to protect the state’s monopoly on the tobacco market have mostly failed.

They have failed because e-cigarettes and vapor products are the Uber of the product industry. They’re a disruptive and innovative technology that has the support of hundreds of thousands of passionate consumersProponents of higher taxes on e-cigarettes have behaved like the taxi cartel in many cities where Uber has thrived. They’ve thrown fits, lobbed outrageous accusations, and demanded that competing products be regulated out of existence.

Before e-cigarettes, the choice to quit came down to the cold-turkey approach, gum, or a patch, which for many simply didn’t work. Before Uber, urban commuters had only public transit or the unreliable taxi cartel. Everything is different now.

E-cigarettes provide an alternative to traditional tobacco cigarettes and have the potential to solve a problem that social engineers could not achieve through stiff taxation and regulation. The free market is going to solve America’s addiction to smoking.

Hundreds of thousands of vapers are joining the Leave Us Alone coalition, fed up with government bureaucrats and lawmakers looking to nickel-and-dime every new industry that threatens their monopoly on steady streams of revenue. These passionate consumers are attending town halls and legislative-committee hearings, and many, for the first time, are voting. Unlike cigarette smokers, vapers aren’t sitting idly by as a product they use is under assault.

The biggest beneficiary of this new multi-billion-dollar market isn’t Big Tobacco. It’s Main Street USA, paved with storefronts filled with new businesses, employees, and products, all of which are contributing to local and state economies. Manufacturers of e-liquids, vapor devices, and other products aren’t shipping jobs overseas; they’re shipping products overseas. Who would have thought this would happen again?

Thousands of good-paying jobs are being created by an industry that is probably going to save hundreds of thousands of lives. The only thing that can stop it is people claiming to be public-health advocates. These are people who pushed for tobacco taxes to discourage smoking and are now pushing for the same new taxes on products that achieve what they never could: getting people to quit. But their fraud has been exposed. They were never about public health; they were always about the money.

Grover Norquist is the president of Americans for Tax Reform. Paul Blair is the organization’s state-affairs manager.

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