Economic Study: Higher Vape Taxes May Increase Smoking Rates

According to foreign media reports, study after study has shown that using vaping products and e-cigarettes as smoking cessation tools can be effective.

Even so, many regions continue to misunderstand vaping products and insist on regulating them in the same way as deadly tobacco products.

Minnesota not only has one of the harshest e-cigarette taxes in the United States, but it was also the first state to impose such a tax by expanding the definition of tobacco products to include e-cigarettes.

For example, the wholesale tax is as high as 95 percent, which naturally creates a strong disincentive for people interested in using these products.

NBER researchers analyzed data from the Current Population Survey Tobacco Use Supplement from 1992 to 2015 and used a synthetic control difference-in-differences method to determine how the tax affected smoking cessation rates among adult smokers.

The compiled estimates suggest—contrary to what many public health experts have argued—that higher taxes are directly associated with higher smoking rates and lower quit rates.

Relative to the control group, Minnesota’s e-cigarette tax increased adult smoking and reduced smoking cessation, implying that current smoking participation has cross-price elasticity with respect to e-cigarette prices.

The results indicate that during the sample period, about 32,400 adult smokers in Minnesota would have quit smoking had the tax not been in place. If this tax were implemented nationwide, it would prevent about 1.8 million smokers from quitting over a ten-year period.

The authors of the paper concluded that taxes on these devices should be considered more carefully, with greater attention paid to both the benefits and the consequences.

Taxing e-cigarettes at the same rate as cigarettes could prevent more than 2.75 million smokers nationwide from quitting over the same period. However, the public health benefits of not taxing e-cigarettes must be weighed against the impact such a decision could have on efforts to reduce youth vaping.