Are US States choosing tax revenue over public health?

In an article published last week on The Reason Foundation’s website, report author Jared Meyer, a fellow at the Manhattan Institute for Policy Research, said, “Making ENDS (electronic nicotine delivery systems) more expense for or unavailable to consumers is misguided because switching to ENDS from combustible cigarettes leads to improved health outcomes for cigarette smokers.”

Meyer presented a case study on the tobacco tax situation in state of Indiana, as this state depends more on tobacco tax than perhaps any other, and the rate at which smoking is dropping is also relatively slower, however of course the report’s conclusions can be applied to all states.

As the smoking rate drops, the tax rates rise

The report said that as the rates in smoking continue to drop, lawmakers are obtaining less revenue from cigarette tax. Naturally tobacco taxes are meant to be going towards the health costs accrued due to smoking related diseases, however only a small percentage of this revenue is being used this way, and the rest is just going towards general expenses.

The state’s inflation-adjusted tobacco tax has expanded a whopping 254% over the past 17 years, and this rise was always brought about by a raise in taxes and not an increase in smoking. Hence why with the general decrease in smoking, politicians are now starting to look at vaping products as a promising avenue of income.

Taxing e-cigs will prove detrimental also financially

However besides the obvious health repercussions that a tax on the products which Public Health England found to be at least 95% safer than regular cigarettes, would have, in his report Meyer also points out that in the long run, this tax could cost the state significant sums of money, by having to spend more via the government-funded medical schemes such as Medicaid.

“Medicaid costs in Indiana during FY 2014 were just over $9.1 billion. Research has shown that about 15 percent of Medicaid spending is directly attributable to smoking-related health problems. Since Indiana received 67 percent of its FY 2014 Medicaid spending from the federal government in Federal Medical Assistance, Indiana’s state burden from its smoking-related Medicaid costs was $459 million in FY 2014. The state spent $17.3 billion in state funds that year, meaning that its smoking related Medicaid costs accounted for 2.7 percent of overall state spending.” said the report.

No justification for taxing e-cigarettes

Jared Meyer cited the evidence in favour of the efficacy of vaping products as smoking cessation tools and their safety in comparison of their combustible counterparts, hence stated that they should be promoted as harm reduction devices instead of being heavily taxed and made unavailable. “While cigarette smoking is proven to lead to negative health outcomes that in turn burden taxpayers, the justification for taxing ENDS is far from clear. Though the long-term health effects are unable to be studied because the industry is less than a decade old, preliminary research and the substantial differences between ENDS and combustible tobacco products point to the conclusion that using ENDS is substantially safer than smoking cigarettes.” said one of the concluding report statements.