Senate Bill 45 was first introduced by Sen. Gary Stevens with the intention of discouraging young people from smoking and vaping, only to be vetoed by Dunleavy who believes the proposed vape tax rate is too high. In a letter explaining his first veto of a bill in almost three years, Dunleavy said it was not possible to separate out the tobacco age limit form the proposed tax, which is why he had to veto the bill.
Meanwhile, a recent study by Yale Professor Abigail Friedman and Georgia State University Professor Michael Pesko, has confirmed that vape taxes have serious unintended consequences by leading to increased smoking rates.
The substitution effect
Titled, “Young adult responses to taxes on cigarettes and electronic nicotine delivery systems,” the study looked into the impact that vape tax increases had on vaping and smoking behaviours among young consumers aged between 18 and 25. In line with arguments and predictions by experts in the field, the researchers found that while higher vape tax rates lead to decreased e-cig use, they also lead to an increase in smoking.
“A one dollar increase in [vaping] taxes yielded significant reductions in young adults’ daily vaping alongside increases in recent smoking,” reported the authors. “The researchers ultimately conclude that “higher taxes on electronic nicotine delivery systems (ENDS) are associated with decreased ENDS use but increased cigarette smoking among 18-25 year-olds.”
An article on Fee.Org highlighted that this is a well known phenomenon known as the “substitution effect,” where the decrease in sales for a product tends to be attributed to them switching to cheaper alternatives.
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