Taxes

How High are Vaping Taxes in Your State?

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This week’s tax map illustrates the variety of vaping and electronic nicotine delivery systems (ENDS) tax designs employed by U.S. states. Higher taxes on vaping and ENDS products discourage smokers from switching to vaping products.

Since vaping entered U.S. markets roughly two decades ago, it has grown into a well-established product category and a viable alternative to smoking. So far, 31 states and the District of Columbia have imposed an excise tax on vaping products.

Vapor taxing methods vary. Authorities tax based on manufacturer, wholesale, or retail price (ad valorem), volume (specific), or with a bifurcated system that has different rates for open and closed tank systems.

Of those that tax wholesale values, Minnesota levies the heaviest tax at 95 percent, followed closely by Vermont at 92 percent. On the other end of the spectrum, Connecticut levies a 10 percent wholesale tax and Wyoming applies a 15 percent wholesale tax.

Delaware, Kansas, North Carolina, and Wisconsin all share the lowest rate per milliliter (mL) at $0.05 per mL. Louisiana has the highest rate per mL in the country after tripling its rate from $0.05 per mL to $0.15 per ml in 2023.

The following map shows where state vapor taxes stand as of July 1, 2023.

Vapor products can deliver nicotine, the addictive component of cigarettes, without the combustion and inhalation of tar that come with smoking cigarettes. While more research relating to the potential harm-reduction qualities of vapor products is needed, for now, the consensus is that vapor products are less harmful than traditional combustible tobacco products. Public Health England, an agency of the English Ministry for Health, concludes that vapor products are 95 percent less harmful than cigarettes.

Given this difference in harm levels, it is important to understand the concept of harm reduction and its relevance for vapor product taxes. Vapor products—even if unhealthy in their own right—are highly attractive as an alternative to smoking. After all, one main reason smokers have a hard time quitting is the addictive nature of nicotine. Harm reduction is the concept that it is more practical to reduce the harm associated with the use of certain products rather than attempting to eliminate it completely through ineffective bans or punitive levels of taxation.

Protecting access to harm-reducing vapor products is intertwined with tax policy because nicotine-containing products are economic substitutes. Low tax rates on vaping encourage consumers to switch from combustibles. High excise taxes on harm-reducing vapor products risk harming public health by pushing vapers back to smoking. A recent publication found that 32,400 smokers in Minnesota were deterred from quitting cigarettes after the state implemented a 95 percent excise tax on vapor products.

If the policy goal of taxing cigarettes is to encourage cessation, vapor taxation must be considered a part of that policy design. For more discussion on the ideal design for vapor taxes and other alternative nicotine products, see our recent report.

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