Washington, D.C. is among the most Uber-friendly cities in the U.S., with both taxis and ride-sharing services providing District commuters safe and effective ways to get from point A to point B. Though it took time and a passionate debate, consumer choice prevailed. The city’s embrace of disruptive technology products, however, may be short-lived.
In what some have called the Uber of the product industry, electronic cigarettes and vapor products are tobacco-free technology products that stand to save millions of lives in the U.S. Unfortunately, Mayor Muriel Bowser’s first budget includes a proposal to tax e-cigarettes at 70% , constituting an 1100% overnight tax increase on the products. If passed, this new tax would not only harm public health but would result in less tax revenue and jobs for the District.
The carcinogens, tar, and countless chemicals contained in combustible tobacco cigarettes directly cause more than 480,000 deaths per year at a rate of 1,300 deaths per day. Public health campaigns, significant regulations and taxes have all been used in the war against smoking, to varying degrees of success.
There now exists on the market a product that stands to accomplish what lawmakers and bureaucrats never could—ending combustible cigarette use, as we know it. Unfortunately, instead of closely studying the evidence behind these disruptive technology product, some politicians have sought to tax them out of existence.
Vapor products are proving to be more effective tools for getting smokers to quit than the nicotine patch, gum, or lozenge. Even the FDA acknowledges the potential public health benefit to e-cigarettes. Regarding smokers, “If we could get all those people to completely switch all of their cigarettes to noncombustible (e-) cigarettes, it would be good for public health,” said Mitch Zeller, the director of the FDA Center for Tobacco Products.
Roughly 19% of adults in Washington, D.C. smoke cigarettes. That’s more than 100,000 people and higher than the national average. It should be the goal of City officials to get that number down, but Mayor Bowser’s tax will discourage the use of far less hazardous alternatives like e-cigarettes and act to preserve the status quo.
The unintended consequences won’t be felt by just D.C.’s smokers. Today, four small business in the District exclusively sell vapor products. These businesses are growing, but a 70% tax on both vapor product liquids and devices would decimate them. With quality vapor devices retailing from $40 to $250, most reasonable consumers will simply purchase from online retailers in Maryland or Virginia. In those states, vapor products taxed at 6% , like most other consumer goods.
To make matters worse for these retailers, a provision slipped into D.C. law last year will have the effect of tying the cigarette tax to the vapor products tax. In other words, any future increase of the D.C. cigarette tax would automatically result in a hike of the vapor product tax.
In the end, D.C. will lose existing tax revenue from the sale of vapor products. Property tax and income tax revenue will be lost as these stores go out of business, employees lose their jobs.
The Mayor and some members of the Council have sold this tax as a means of “simplifying” the tax code for “tobacco products.” This defies common sense. The presence of nicotine in some of these products does not warrant this unreasonable tax, as it is not nicotine that kills smokers, it’s the 4,000-plus chemicals created by lighting tobacco on fire. Much as the District does not tax Nicorette gum, it should not impose additional taxes on vapor products.
Because the average income of a smoker is less than $30,000 per year, a new study by State Budget Solutions suggests that e-cigarettes stand to save D.C. taxpayers hundreds of millions dollars in health care costs, particularly on Medicaid. The potential savings resulting from low-income cigarette users making the switch to e-cigarettes exceeds cigarette tax collections and tobacco settlement payments by 214%. With growing demands on public housing, education, and District health care costs, this provides yet another reason for City Council to take a step back and reevaluate the evidence.
Mayor Bowser’s 70% tax is even being considered before D.C. takes the responsible step of imposing age restrictions on the sale of the products to minors, which 45 states have done at this point.
The damage this tax will do to small businesses and consumers looking for an effective way to quit smoking must not be ignored. The Council should remove Mayor Bowser’s tax on consumers looking to quit smoking and reject efforts to tax vapor products in the future.