Taxes, buying age go up for e-cigarettes

States taking steps as vaping devices grow in popularity among young people

WASHINGTON — With young people taking up electronic cigarettes in epidemic numbers, numerous states are slapping hefty taxes on vaping products and raising the legal age to purchase them to 21.

The twin actions are designed to reduce vaping among young people and to bring in revenue for the states.

The moves have taken on added urgency since reports that dozens of young people who used vaping products have been hospitalized for respiratory problems in states including California, Illinois, Minnesota and Wisconsin. Doctors who have reported the illnesses to their publichealth departments aren’t sure exactly what caused the problems.

E-cigarettes are batterypowered devices that heat up liquids containing nicotine or other substances, creating water vapor that is inhaled. Their popularity has skyrocketed with the advent of small, cheap vaping devices widely available in many stores.

Like the jump in vaping’s popularity, state taxes and regulations have ratcheted up recently. Of the 17 states and the District of Columbia that have specific taxes on vaping products, half implemented them in 2019, according to the Public Health Law Center at the Mitchell Hamline School of Law, which researches the links between public policy and health. In addition, the District of Columbia and 17 states (not all of the states are the same ones that have raised taxes) have a 21-year-old vaping age limit.

San Francisco in June became the first U.S. city to outright ban sales of vaping products, but an industry-backed initiative that would overturn the ban has qualified for the November ballot.

“Vaping has a similar effect [to cigarettes] and it’s on the rise,” Illinois Gov. J.B. Pritzker told Stateline earlier this month. “I have teenagers in high school, they tell me, I can see it. It’s an enormous problem. We know there are adverse health effects of vaping.”

Pritzker in June signed a budget including a new 14.5% tax on vaping products, which went into effect July 1. The Illinois budget also set the legal age for buying traditional and e-cigarettes at 21.

“It’s about deterrence. It’s not a big moneymaker, though it will bring in some revenue,” Pritzker said.

Illinois estimates revenue of $15 million in fiscal 2020 from its e-cigarette tax. That money, along with funds from a tax increase on traditional cigarettes from $1.98 to $2.98 per pack, will help pay for the state’s Medicaid program, Pritzker said.

Like Illinois, some states set their tax based on the wholesale price stores pay for vaping products, including Minnesota’s 95% tax and Vermont’s 92% tax. California’s tax is set at 65% of the retail price customers pay. Other states tax by the milliliter of liquid contained in the devices.

In virtually all states with a tax on traditional cigarettes, revenue from the taxes has declined with the falloff in smoking. The Tax Foundation, a conservative think tank based in Washington, D.C., reports that across almost all states, cigarette tax increases produced a temporary bump in revenue, followed by lower collections in later years.

“States definitely view ecigarette taxes as low-hanging fruit,” said Janelle Cammenga, policy analyst at the Tax Foundation. “Because some people view vaping as a public nuisance and because vapor products contain nicotine, an addictive substance, legislators can pitch the tax as a sin tax meant to reduce consumption.”

A 2018 surgeon general’s report said e-cigarettes have become, since 2014, the most commonly used tobacco product among American youth. Ecigarette use among U.S. middle and high school students increased 900% from 2011 to 2015, the report said.

Use declined for the first time from 2015 to 2017, but then rose again. It increased 78% among high school students, from 11.7% in 2017 to 20.8% in 2018. The recent increase coincides with the soaring popularity of e-cigarettes made by Juul Labs Inc. and its imitators, which market small, handy refillable dispensers that look like large thumb-drives, along with nicotine-containing liquid cartridges.

Sales of Juul have skyrocketed, according to the Centers for Disease Control and Prevention, growing from 2.2 million devices sold in 2016 to 16.2 million devices in 2017, giving Juul the greatest share of the U.S. e-cigarette market by December 2017. The use of Juul in schools, including in classrooms and bathrooms, is widespread, despite rules against it. Juul contains among the highest nicotine content of any e-cigarette, the CDC noted.

Since that report came out, Juul has mounted a “Tobacco 21” campaign, urging states to raise the legal age for buying tobacco products — including cigarettes and e-cigarettes — to 21. It also has abandoned flavored liquids, leaving the door open for competitors to swoop into that market.