Tag: Build Back Better Act

  • Report: Nicotine Tax Will Boost Smoking, Hurt Economy

    Report: Nicotine Tax Will Boost Smoking, Hurt Economy

    A new report finds that combustible cigarettes will become less expensive than vaping products and nearly 43,000 jobs would be lost if the proposed nicotine tax contained in the Build Back Better bill (HR 5376) were to become law. The Vapor Technology Association (VTA) funded study, The Negative Economic Impacts of the New Nicotine Tax Imposed Only on Vapor Products In the Reconciliation Bill, conducted by economist John Dunham & Associates, is being billed as a comprehensive analysis of the negative effects that the proposed tax will have on smokers, the industry and the economy.

    “Our analysis finds that the bill would not create anything close to parity with cigarette taxes but, rather, would tax vapor products at a much higher rate – up to nine times higher – than the tax on a pack of cigarettes,” the report states. “The proposed nicotine tax in the Reconciliation Bill would lead to a net price increase on vapor products at retail of about 53 percent (21.2 percent for a standard two-pack of closed-system pod products and 73.5 percent for a standard 60 milliliter bottle of open system e-liquid), while the price of cigarettes and other tobacco products would remain unchanged as they would not be subject to any additional federal tax.”

    The study also concludes that the proposed nicotine tax would lead to a reduction of nearly 42,800 full-time equivalent jobs and the loss of $2.2 billion in wages and benefits, negatively impact the size of the overall economy which would fall by about $7 billion and would result in states and their localities losing $620 million in taxes while the federal government attempts to generate revenues.

    “A pack of cigarettes contains approximately 204 milligrams of nicotine (10.2 mg/cigarette x 20 cigarettes per pack).  Applying the proposed nicotine tax of 2.78-cents per milligram to cigarettes, means that the tax on a pack of cigarettes should be $5.41, not $1.01,” the study states. “Viewed another way, the federal tax on cigarettes, if applied to their nicotine content, would only amount to less than half a penny per milligram, not the 2.78-cents Congress seeks to impose on e-cigarettes ($1.01 per pack / 204 mg of nicotine per pack).”

    As defined in the bill, the proposed tax would be equal to about $2.22 on the standard closed system nicotine vapor product (such as a two pack of JUUL pods), and a $10.01 on the standard average 60 milliliter bottle of nicotine containing e-liquid used in an open system vapor device,” according to the study.

    If passed, the proposed tax would also lead to a loss of about 31.9 percent of vapor product sales or 3.7 million milliliters of e-liquid consumed. Of this loss, 61.2 percent would be the result of consumers switching to other tobacco products, including combustible cigarettes. An additional 18.5 percent of these lost sales would move to the black market, according to the study.

    “Modeling suggests that a large portion of consumers would react by purchasing unregulated products over the black market or make their own e-liquids,” according to the study. “These figures (which reflect a price increase resulting from the tax of 53 percent) are conservative and are not out of line with other studies examining the substitution of vapor products and combustible cigarettes when taxes are imposed.”

  • Nicotine Tax Inches Closer as U.S. House Passes Legislation

    Nicotine Tax Inches Closer as U.S. House Passes Legislation

    Critics call the proposal ‘a public health disaster.’

    The U.S. House of Representatives has passed the portion of the Build Back Better Act that includes a controversial nicotine tax. The legislation will now head for the Senate, where it faces an uphill battle.

    In a 220 to 213 vote, the House voted mostly along party lines for the legislation that has often been compared to the New Deal. Biden signed the second piece of his domestic agenda, a $1.2 trillion package focused on infrastructure improvements, into law earlier this week.

    To help fund the plans, the legislation calls for a tax of $50.33 per 1,810 mg of nicotine for “any nicotine product that has been extracted, concentrated or synthesized.”

    Critics warned that raising taxes on smoking alternatives while leaving taxes the same on traditional cigarettes risks driving vapers back to smoking.

    “The science is crystal clear: This bill is a public health disaster,” said Tim Andrews, director of consumer issues at Americans for Tax Reform. “The tax hikes on people trying to quit smoking contained in H.R. 5376 would lead to more people, millions more Americans smoking—and dying as a result.”

    Andrews’ concerns were echoed by Michael Pesko, an associate professor in the Department of Economics at Georgia State University.

    “Given extensive peer-reviewed evidence indicating that these products are substitutes, an unintended but inevitable effect of increasing taxes on e-cigarettes is to increase cigarette use,” he said. “A wide array of research suggests that this boost in cigarette use as a result of large e-cigarette tax increases would significantly increase overall tobacco-related death and disease.”

  • Vapor Tax Resurfaces in Build Back Better Act

    Vapor Tax Resurfaces in Build Back Better Act

    Photo: DedMityay

    U.S. Lawmakers have reintroduced a tax on vapor products into the Biden administration’s Build Back Better Act, reports the Winston-Salem Journal. Earlier a series of controversial tobacco hikes had been removed from the legislation.

    The latest version of the bill calls of $50.33 per 1,810 milligrams of nicotine for “any nicotine product that has been extracted, concentrated or synthesized.” The previously proposed vapor tax was $100.66 per 1,810 mg.

    Vapor industry representatives were unimpressed. “American voters are already livid with paying high prices at the pump and the grocery store,” Amanda Wheeler, president of the American Vapor Manufacturers Association, was quoted as saying by the Winston-Salem Journal.

    “It’s a certainty they will be outraged with a gigantic tax on a product that millions use to quit cigarettes.”

  • Tobacco Tax Dropped from U.S. Legislation

    Tobacco Tax Dropped from U.S. Legislation

    Photo: RomanR

    Previously proposed tobacco tax increases have been removed from the U.S. Build Back Better Act, a massive piece of legislation conceived to fund Covid-19 relief, boost economic recovery and invest in new infrastructure. The most recent version of the proposed bill, H.R. 5376, makes no mention of the measures.

    The dropped proposal would have effectively doubled the federal excise tax on small cigars and cigarettes, and it would have increased the tax on chewing tobacco from a little over $0.50 to $10.70—more than 21 times its current level. It also called for a new tax on vapor products.

    The proposed tobacco tax hikes attracted fierce criticism from retailers and tobacco harm reduction advocates, among others.

    On Sept. 24., the National Association of Convenience Stores sent a letter warning lawmakers against unintended consequences, such as illegal trade and underage sales.

    “When the price of a product rises too much too fast, illicit purveyors will seize the opportunity to exploit and take advantage of current users and entice new users without discriminating based on age,” the letter read. “This undermines the responsible measures our retailers have taken and creates a problem for society as a whole.”

    Earlier, the Tax Foundation cautioned that the proposal would make cigarettes—the most harmful tool to consume nicotine—cheaper than other, less-risky tobacco products in many states.

    While every U.S. state taxes cigarettes by quantity, a majority tax other tobacco products by price. When states tax tobacco products by price, the tax on the product will “pyramid” since the federal tax is levied at the manufacturer level and the state tax is levied at the distribution level, according to the Tax Foundation.

    “In effect, the state tax base includes the federal tax and becomes a tax on a tax,” wrote Ulrik Boesen, senior policy analyst in excise taxes of the Tax Foundation.

    While the most recent version of the H.R. 5376 omits tobacco tax hikes, there is no guarantee the measure will not reappear in future renderings of the proposed legislation.