A Tale of Tobacco Taxation: How Will Vaping Be Affected By California’s Prop 56?
If you think cigarettes just keep getting more and more expensive, you’re not imagining it. The latest federal hike in the tobacco tax came in 2009 with the passage of the Children’s Health Insurance Program Reauthorization Act. The tax jumped from 39 cents a pack all the way to $1.01 a pack.
The cost of a pack of cigarettes also includes state taxes. These range from just 17 cents in Missouri all the way up to $4.35 per pack in the state of New York. Altogether, federal, state, local, and sales taxes make up 56.6% – over half the average cost of a pack of cigarettes.
What’s the Point of a Tobacco Tax?
The purpose of taxing tobacco is twofold: the first objective, of course, being to generate revenue for the federal and state governments. The second purpose is more noble, however. Studies show that the more tobacco is taxed, the more smoking rates decrease. Simply put: if people can’t afford to smoke, they’ll give it up.
This is particularly true among young smokers. Research has proven that for every 10% increase in a pack of smokes, the youth smoking rate falls by nearly 7%. It also applies to minority and low-income smokers. Every time there is a bump in the tobacco tax, cigarette quitting hotlines are inundated with calls.
Case in Point: California
In the fall of 2016, California voters approved Proposition 56, legislation that included a $2-per-pack cigarette tax increase – the largest hike since the state first started taxing tobacco nearly 60 years ago. The tax kicked into gear in April, sending a pack of cigarettes skyrocketing from an already-pricey almost $6 per pack to an astronomical $9.
What was the effect of the increase? Just before the law went into effect, sales of tobacco soared due to people running out and stocking up. In March, tobacco tax revenue was up to a whopping 37% higher levels than from a year before. From April to May, tobacco tax revenues (and cigarette sales, by default) plummeted.
How far did it drop? A government analyst expected a drop of around 20 to 30%. In reality, cigarette tax revenue measured at a stunning 64% lower in May 2017 than one year before. While some suspect the drop is due to consumers smoking up their stocked-up cigarette supplies, public health advocates express optimism that the drop is a positive sign of things to come.
“I have felt for a long time where we’re getting to the point in California where smoking is so low that a couple of good shoves like this one, and we might be rid of it,” Dr. Stanton Glantz, a researcher at UCSF’s Center of Tobacco Control Research and Education, told KQED News.
On July 1, the increased tax rate went into effect for all “tobacco products” besides cigarettes. These include little cigars and other forms of tobacco, as well as “nicotine intended for human consumption.”
California Vaping Gets Caught in the Net
That last bit means that unfortunately, when voters approved Prop 56, they also voted to penalize people who vape. The bill includes a tax increase on all nicotine-containing e-juice. (Non-nicotine e-juice is not subject to the tax.) The increase also targets “nicotine delivery devices” including electronic cigarettes, e-cigars, e-pipes, vape pens, and e-hookahs if they are sold in combination with substances that contain nicotine.
When many people stop smoking tobacco cigarettes, they often rely on e-cigarettes and other vaping devices as a healthier alternative. The Royal College of Physicians of London even published a report promoting e-cigarettes as an excellent substitute for cigarettes. With the passage of Prop 56, California has become one of only six states to tax vaping devices and e-juice along with tobacco.
Potential Effect on Vaping?
As with the real impact on the rate of smoking, the effect of Prop 56 on vaping in California won’t be known until more time has passed. From small mom-and-pop vape shops to individual consumers, it’s likely that the results won’t be good. The legislation even has the New York Times asking “Who Wins If California Voters Tax E-Cigarettes?”
The likely answer: no one.