As technology moves ahead, state-level plans for sin taxes rush to keep up with it. That seems to be what’s happening in Rhode Island this year, where their 2019 budget has taken aim at the vaping industry, planning a staggering 80% tax on all vaping products, including the liquid nicotine required to make them operate. This seems like a highly effective plan if you want to completely sink a relatively new and growing industry. What better way to shut it down than to nearly double the price of their offerings in an effort to fluff up the state government coffers? (Daily Vaper)
A proposal slipped into Rhode Island’s budget for 2019 targets vapers and small businesses in the state with a massive tax on electronic cigarettes.
Democratic Gov. Gina Raimondo’s budget proposal advocates an 80 percent wholesale tax on all vapor products and related equipment in the state, something harm reduction advocates say will bankrupt the state’s vaping businesses and push former smokers back to deadly combustible cigarettes. Tobacco control advocates previously attempted to secure the 80 percent tax on vapor products in the state’s 2018 budget, but their efforts ultimately failed.
The tax would effectively label electronic nicotine delivery systems as tobacco products, despite containing no actual tobacco. Vaping advocates argue the tax will harm overall public health in the state by cutting off former smokers’ access to vapor products. They also note the proposal will fail to boost state revenues due to diminished sales, coupled with consumers crossing into neighboring states to buy their vapor products.
Let’s take a moment to look at the staggering number of things wrong with this proposal.
First, these are not tobacco products. The state plans to tax them under the same category, despite the fact that there is no tobacco involved in the process. Further, the tax applies to the equipment used to “vape” the liquid nicotine. Compare that to the tax system applied to tobacco. Even the worst sin taxing states haven’t tried applying that sort of a penalty to buying a pipe.
Next, as noted above, the damage to the nascent vaping industry will be epic just as it was in Pennsylvania when they instituted a 40% tax. After the tax went into effect, more than one hundred new businesses shut down just in the greater Philadelphia region.
In terms of health, not only will this likely push people who managed to quit cigarettes by switching to vaping back to tobacco, but new vapers who have probably developed a habit may feel compelled to go try smoking cigarettes for the first time. Rather than allowing this new technology to continue to help people quit smoking, a tax such as this will likely lead to the opposite effect, creating a new generation of smokers who find it more economically practical to light up rather than vape.
And finally, in terms of raising revenue for the state, this scheme never works. Every time states push for a big new sin tax on tobacco it blows up in their face and that’s what going to happen to a vaping tax as well. In 2016, New York State actually lost a half billion dollars in tax revenue on tobacco rather than seeing an increase. And it was largely due to increased trends in both black market tobacco piracy and people traveling out of state to buy cigarettes. Even worse, petty crime which never existed before will crop up and the police will need to be chasing around nicotine pirates the same way they have to pursue tobacco pirates in places like New York and Chicago. When you tax a desired item at a high enough rate, somebody will come along to fill the void by setting up a black market operation.
Rhode Island is on the verge of doing a tremendous disservice to its citizens. They’ll probably wind up with less tax revenue than they’re currently taking in and see increased health problems as they force the number of people smoking (likely out of state) cigarettes upward.