NJ e-cig industry pushing back on Christie tax increase plan

This story began picking up steam (pun intended) in New Jersey last month, when Chris Christie and a coalition of lawmakers began pondering plans to jack up taxes on the new electronic cigarettes in the same fashion that they tax conventional tobacco products. It struck me as unusual that a Republican considering a presidential bid would be on the record in support of raising any taxes, but I suppose politics really do make for strange bedfellows. Now that the various players involved have had time to consider their options, small business owners looking to move into this market have banded together to strike back.

The growing e-cigarette industry is waging a battle against New Jersey’s hefty proposed tax on the devices, worrying that such a levy could set a precedent as states start to grapple with the new products.

Gov. Chris Christie and some New Jersey legislators say they want to place a 75% wholesale tax on e-cigarettes and some related gear, mirroring what New Jersey charges on traditional smokes, currently $2.70 for a pack of 20.

No special tax is currently imposed on e-cigarettes, battery-operated devices that heat liquid nicotine and create smokeless vapor.

Nearly 50 independent e-cigarette retailers have banded together to fight the proposed tax. The group, the New Jersey Vapor Retailers Coalition, has hired one of the state’s largest lobbying firms, MWW, to convince lawmakers that the levy would not only cripple their fledgling businesses, but would hurt other small operators who sell the devices, including gas stations and convenience stores.

The governor is also making a tired old claim about how this tax could generate as much as $35M in new revenue. But we’ve seen this story play out before and it doesn’t tend to work that way, with the Garden State’s neighbor Maryland serving as an example. But no matter the rationale being employed, it’s interesting to see these business owners learning the lessons of the past and trying to get ahead of the game.

We have a history of giving a brief edge to small, emerging businesses in order to allow them some space to grow and spur job creation. And in this particular instance, there isn’t much of a case to be made for lumping this type of financial lashing in with sin taxes. Even if you’re in favor of massive taxes on tobacco – ostensibly to discourage tobacco use – how would you justify a massive tax on a product being employed as a pathway to get people to stop smoking?

The mind doth boggle.