Biden’s Vaping Tax
Sparks Concerns People Will Go Back to Cigarettes
House Democrats are poised to vote on imposing a new federal excise tax on e-cigarettes—but without a tax increase on traditional cigarettes—leading some public-health experts to warn that the provision could push vapers back to cigarette smoking.
The provision is part of the latest version of the party’s social-spending and climate bill that could pass as soon as next week. It faces an uncertain path ahead given opposition in the Senate.
The House bill includes a measure intended to tax vaping products on par with the existing federal cigarette tax rate of $1.01 per pack. It would raise about $9 billion over a decade. The nicotine tax would apply to e-cigarettes, vaping liquids and oral nicotine pouches. It wouldn’t apply to nicotine gums, patches or other smoking-cessation aids approved as medical products by the Food and Drug Administration. Proponents say the measure would discourage underage children and teens from buying e-cigarettes, which aren’t currently subject to a federal excise tax.
The nicotine tax provision represents an agreement among the House, Senate and White House, but concerns expressed by Sens. Catherine Cortez Masto (D., Nev.) and Joe Manchin (D., W.Va.) could result in its exclusion from a final agreement.
Under the nicotine tax, the amount consumers pay would vary depending on a product’s volume and nicotine concentration. The popular 5% strength refill cartridges made by market leader Juul Labs Inc. would be taxed at $2.22 for a two-pack, the smallest package available, industry experts said. The same-strength refill cartridge for the No. 2 U.S. brand, Reynolds American Inc.’s Vuse Alto, holds more than double Juul’s volume and would be taxed at $2.93 for a single-pack, these experts said.
An earlier version of the House Democrats’ social-spending and climate bill also included a provision that would have doubled the federal excise tax on a pack of traditional cigarettes to $2.01. That version, which would have raised nearly $100 billion over a decade, was supported by a coalition of public-health groups including the American Lung Association and the American Cancer Society.
Some public-health experts say that adopting an e-cigarette tax without raising the tax on cigarettes would push people back to cigarettes because it would eliminate the price differential that makes vaping a more attractive option financially.
The House bill considers a 5% Juul refill pod to be equivalent to a pack of cigarettes, though users’ consumption patterns vary and the body absorbs nicotine from smoke and e-cigarette aerosol at different rates. A two-pack of the Juul refill pods sells for $9.99 on Juul’s website. The average pack of cigarettes in the U.S. costs $7.01 as of November 2020, including local, state and federal excise taxes, according to the economic consulting firm Orzechowski and Walker.
In a 2020 article published in the Journal of Risk and Uncertainty, Michael Pesko, an economist at Georgia State University whose research is funded by the National Institutes of Health, estimated that a tax on e-cigarettes equivalent to the one in the current House bill would result in 2.5 million additional adult cigarette smokers in the U.S.
“This policy would be a public health disaster, guaranteed to increase smoking and deaths from it,” said Kenneth Warner, a tobacco researcher and dean emeritus of the University of Michigan School of Public Health. “Nicotine products should be taxed in a risk-proportionate manner, and e-cigarettes are substantially less hazardous than combustible cigarettes.”
Other public-health groups say they still support the bill, even with the removal of the cigarette tax increase, because they believe it would discourage young people from vaping. They say the federal tobacco tax system hasn’t kept up with the latest generation of tobacco products.
“We believe the net impact on public health will be positive,” said Matthew Myers, president of the Campaign for Tobacco-Free Kids, speaking about the current House bill. But he added: “It would have been better—far better—if it had been paired with an increase in the cigarette tax.”
Underage vaping surged in 2018 and declined after the federal minimum tobacco-purchase age was raised to 21 and the FDA barred the sale of sweet and fruity e-cigarette cartridges. About 11% of U.S. high-school students—an estimated 1.7 million children—said they had used e-cigarettes at least once in the past 30 days, according to a federal survey conducted earlier this year.
E-cigarettes remain the most commonly used tobacco product among young people. As youth vaping rates have climbed and fallen in recent years, cigarette smoking among young people has remained at historic lows.
Vaping is widely viewed by public-health officials as less harmful than cigarette smoking, which is associated with 480,000 deaths in the U.S. each year. The FDA is now conducting a review of vaping products in the U.S., in which it will allow only those it deems “appropriate for the protection of public health” to remain on the market. In October, the agency issued its first such authorization for an e-cigarette made by Reynolds American. The agency said that the product could reduce smokers’ exposure to harmful chemicals if they switched to the device.
House Speaker Nancy Pelosi (D., Calif.) hopes to bring the House bill for a vote as soon as next week. Should it pass the House, it could face changes in the Senate because some senators whose votes will be needed to pass the broader bill oppose the idea. Sen. Manchin, a critical vote in the 50-50 Senate, has said he doesn’t support the nicotine tax provision.
Sen. Cortez Masto also said she opposes the nicotine tax because it would affect households earning less than $400,000, a threshold below which President Biden had said he wouldn’t raise taxes.
“I’m very clear. I don’t support any type of tax, a regressive tax on the very people that we’re trying to cut costs, cut taxes on,” she said.
The White House has said that the proposed tax increase doesn’t violate that pledge because vaping isn’t a required cost for families. The administration says the House proposal would promote public health and close a gap in the law that lets vaping go untaxed.
By Jennifer Maloney and Richard Rubin