Tobacco has traditionally been taxed based upon risk, and understandably so. Smoking is exceedingly dangerous. However, the New Hampshire legislature may deviate from that traditional method of risk-based taxation. Indeed, there are murmurs that they may levy a hefty tax on e-cigarettes and vapor products, the effects of which could do more harm than good.
E-cigarettes have a reduced harm profile compared to combustible cigarettes, and when e-cigarettes are taxed at a lower level, the price difference incentivizes smokers to switch and make less harmful decisions. Conversely, the additional tax on e-cigarettes being considered by the New Hampshire legislature would effectively punish improved behavior and discourage smokers from quitting.
To be clear, this should not be read as an endorsement of nicotine usage of any kind, but rather as a nuanced approach to reduce the harm associated with addiction to combustible cigarettes by rewarding less harmful behavior. For instance, if you’re going to tax cigarettes at a given level, then its safer alternative should be taxed not at the same level but at a reduced rate.
There is solid data demonstrating that e-cigarette prices influence smokers and that e-cigarette products serve as a safer substitute for combustible cigarettes. This is primarily because they do not rely on the cigarette combustion process that releases over 7,000 chemicals, many of which are carcinogenic. In fact, electronic cigarettes are 95 percent safer than combustible cigarettes.
Concurrent reports from the United Kingdom and the U.S. Office of the Surgeon General have compared the e-cigarette risk profile to similar combustible cigarette replacements, such as the patch and nicotine gum. Their data, along with compelling reports from the Centers for Disease Control (CDC), illustrate the e-cigarette’s promising viability as a quitting mechanism. E-cigarette users are much more likely to attempt to quit than non-e-cigarette users—65 percent versus 40 percent. The same CDC report shows that e-cigarette users enjoy higher rates of long-term success in quitting than non-e-cigarette users—4 percent versus 8 percent. And additional sources suggest that the quitting rate among e-cigarette users may be as high as 18 percent.
In order to enhance these positive effects, it is important to keep the costs associated with e-cigarettes relatively low. The market has come a long way in this endeavor—a formerly impossible task due to the inelasticity of cigarettes. Smokers were previously forced to buy cigarettes regardless of steep prices, because there was no viable alternative, until e-cigarettes disrupted the market. Cost is relevant to harm reduction, especially among vulnerable populations. When legislating on nicotine delivery system policy, it is important for policymakers to remember that those in lower socioeconomic strata—who share a higher burden of tobacco-related diseases—would be most harmed by the proposed tax increase.
The potential for vapor nicotine delivery systems to mitigate the risks associated with combustible cigarettes cannot be understated. The New Hampshire Legislature ought to act with prudence regarding the e-cigarette tax to ensure that the total cost of e-cigarettes and vapor products is at a level that encourages, rather than discourages, people to choose these less harmful products. Doing so will reduce the frequency of tobacco-related diseases for the estimated 15.7 percent of New Hampshire residents who smoke.
The bottom line is that incentives matter. Raising taxes too highly on this improved behavior disincentivizes individuals from giving up smoking. New Hampshire should promote better decisions, not punish their residents with unnecessarily high taxes.