Proposals to tax e-cigarette nicotine juice: NC (low) and WA (high)

NC proposal:  5 cents a milliliter of juice, regardless of nicotine content;  WA: 8 cents a milligram of nicotine.  There are about 1,000 milligrams in a milliliter.

Here is source material:

North Carolina:

Tobacco Industry Proposes Tax on E-cigarettes, By Rose Hoban and Hyun Namkoong

The excise tax supported by a representative of R.J. Reynolds would place a 5 cent tax on the equivalent of a pack of cigarettes.

The scene was enough to make a reporter look twice. Even before the official start of the North Carolina General Assembly session on Wednesday, a representative from R.J. Reynolds Tobacco Company stood before a legislative committee and asked lawmakers to tax his products.

But the tax that tobacco interests were requesting from the Revenue Laws Study Commission was minuscule compared to North Carolina’s usual tobacco tax, which at 45 cents a pack is itself one of the lowest in the nation.

And the move left anti-smoking advocates scrambling to counter a suggestion made by an industry that – even if tobacco is no longer “king” – still has enough pull to get a bill it wants into this year’s short session.

Some e-liquids from Liberty Flights and new 510N e-cigarette device. Photo by wstryder, flickr creative commonsNicotine fluid comes in various concentrations, one of the most common is a formulation that delivers the same amount of nicotine from a cigarette in one drop. Photo by wstryder, flickr creative commons

Numbers game

A single Marlboro delivers about 1.2 milligrams of nicotine. According to several websites selling e-cigarette vapor products, only a single drop of “smoke juice” (which has a strength of 24mg/mL) is required to get about the same amount of nicotine as from the Marlboro.

There are 20 drops in a milliliter, which means a single milliliter of smoke juice yields the equivalent of a pack of cigarettes. Tobacco industry lobbyists were asking lawmakers to levy a nickel per milliliter tax, which would equate to a nickel tax on the same number of smokes in a pack of cigarettes.

“The proposed tax is crazy low,” said Peg O’Connell, a lobbyist who represents public-health interests. “It is exceptionally low for the financial situation our state finds itself in.”

In contrast, in Washington state, lawmakers asked for a tax on each milligram of nicotine, which means stronger concentrations of smoke juice get taxed at a higher rate, no matter the volume of the bottle. Washington’s proposed per milligram plan yielded a total tax of more than $28 for a typical 15 milliliter bottle, which delivers the equivalent of 15 packs of cigarettes.

In contrast, the proposed North Carolina tax would yield 75 cents in tax on the same bottle.

It is estimated that the nickel tax would lead to $2.1 million in revenue for the state in its first year, with an estimated $5 million in expected revenue during subsequent years of the tax.

Vapor or tobacco products?

Language defining e-cigarettes as vapor products rather than tobacco products is also inserted in the bill, meaning they would be excluded from federal regulation.

photo of ashtray that's part of toilet paper dispenserEven if tobacco is no longer “king” in North Carolina, remnants of a time when the industry was predominant still linger at the General Assembly. In many bathrooms in the legislative building, ashtrays are still part of the toilet paper dispensers – a reminder of the past. Photo credit: Rose Hoban

A similar attempt by industry last year to change the definition of the vapor products in North Carolina failed, due in large part to opposition led by the legislature’s only physician, Rep. Jim Fulghum (R-Raleigh).

“We agreed it was a tobacco product last year; apparently this is not the theme of what’s going on now,” Fulghum said. “They want to try to say it’s not a tobacco product. We agreed it was, and everybody agreed, and industry people agreed, and I’m sticking to that.”

E-cigarettes are currently unregulated by the FDA. However, the FDA recently proposed extending its authority to include additional tobacco products such as e-cigarettes, cigars and pipe tobacco.

Public-health advocates worry that categorizing e-cigarettes as vapor products will lead consumers to believe that they’re a healthier alternative to tobacco. E-cigarette manufacturers have been marketing e-cigarettes as a cleaner or safer alternative to cigarettes, but research supporting that contention is thin.

“The attempt by the industry to define this product differently than it already is in North Carolina law raises a huge number of red flags for anybody interested in the health of North Carolina’s children,” O’Connell said.

Advocates are also concerned that the vapor-product classification will result in less regulation of a product that has not been fully studied.

“If there is a separate category of vapor products, it will make it that much easier for that so-called category to be exempt from other tobacco-control laws in our state,” said Pam Seamans, executive director of the N.C. Alliance for Health.

Research on the health effects of e-cigarettes is preliminary and comprehensive research studies examining long-term effects have yet to be completed.

“Two things are certain about e-cigarettes. One is that they contain one of the most addictive chemicals in society,” said Adam Goldstein, a researcher from UNC-Chapel Hill who is in the midst of studying the effects of e-cigarettes.

“And second, they are big business for everyone.”

+++

 

Washington State:

The original bill imposed a 95 percent tax on wholesale e-cigarette products, and the version of the bill that passed out of the House Finance Committee last week cut it to 75 percent. The striker takes an entirely different approach. It imposes a tax of 8 cents per milligram of nicotine on products that contain nicotine – not counting the gum, patches, and other stop-smoking nostrums that have been approved by the Food and Drug Administration. What people are forgetting is that milligram measurements are by-the-milliliter, Halsan says.

So a tiny little 15 milliliter bottle of Marlboro-strength vapor-juice that now costs about $12 – about the equivalent of five packs of cigarettes contains 360 milligrams of nicotine. It would be hit with a tax of $28.85. Sales tax would pyramid on top of that. So when you consider that a pack of Reds costs about $9 these days, or $45 for five, there would really be no price difference at all. The big cost advantage that has encouraged thousands of ex-smokers to invest in costly “vaping” apparatus would be no more. There goes one of the biggest incentives to quit. Vapers tell Washington State Wire the cost advantage has done what generations of health warnings have not. “The cigarettes I was smoking cost me about $10 a pack,” says vaper Eva Hobart of Rainier. “Whereas this is seven dollars and lasts me for five days – as well as getting the cigarette smoke out of my lungs that was there for so many years.”

http://washingtonstatewire.com/blog/as-vapers-organize-legislature-scrambles-to-impose-new-e-cig-tax-new-compromise-proposal-even-higher-than-the-original/

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Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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