When all eyes were focused on the emerging coronavirus outbreak, Kentucky lawmakers managed to raise taxes and abandon their long-held, forward-looking tax philosophy that placed a premium on harm reduction. Indeed, thanks to HB 351 , e-cigarettes – a tobacco harm reduction product – will be taxed at a much higher rate come August 1, but this is problematic on a couple fronts. In fact, Kentucky’s new tax law could undermine public health, and it also flies in the face of Kentucky’s tax framework.
The Kentucky code reads , “…the General Assembly acknowledges that some in the public health community recognize that tobacco harm reduction should be a complementary public health strategy regarding tobacco products. Taxing tobacco products according to relative risk is a rational tax policy and may well serve the public health goal of reducing smoking-related mortality and morbidity and lowering health care costs associated with tobacco-related disease.”
Despite officially maintaining this stance, Kentucky lawmakers’ latest tax increase conflicts with this philosophy. Indeed, the science is clear: e-cigarettes are far less harmful than combustible cigarettes. The venerated Public Health England stated that e-cigarettes are 95 percent less hazardous  because they do not employ the combustion process that releases thousands of chemicals – many of which are carcinogenic. The US Surgeon General stated  that e-cigarettes’ effects on the body are similar to nicotine patches, gum, and lozenges, and e-cigarettes have become the number one tool  Americans use to quit smoking cigarettes.
Even though e-cigarettes are less harmful than combustibles and help Americans kick their smoking habit, the Kentucky Legislature strangely saw fit to tax e-cigarettes at $1.50 per cartridge, compared to a $1.10 tax per pack of cigarettes. But this tax hike does little other than to disincentivize Kentuckians from trying less dangerous products, like e-cigarettes, in lieu of combustible cigarettes.
What’s more, this tax disparity may encourage e-cigarette users to return to smoking, which runs counter to public health officials’ goals. The truth is that Kentucky must do better. After all, nearly a quarter of Kentuckians are smokers, almost 9,000 die a year  from tobacco use and roughly $1.9 billion are spent on related healthcare costs a year.
Kentucky’s tax hike is clearly inconsistent with its longstanding position on taxing “products according to relative risk”, and it will ultimately lead to adverse health effects. Further, given that Kentucky’s e-cigarette tax is one of the largest in the country , this may drive Kentuckians, who live in communities near the state’s border, to make e-cigarette purchases out-of-state – ensuring that Kentucky will collect less in taxes.
A central role of state governments is taxing the public and products. Taxation helps pay for police, roads, schools, etc. However, excise taxes, like those on tobacco products and e-cigarettes, ought to be fairly balanced based on relative risk and provide beneficial public health outcomes. Kentucky policymakers used to hold this belief. Unfortunately, they’ve recently strayed from their roots.
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- “HB 351”: https://apps.legislature.ky.gov/recorddocuments/bill/20RS/hb351/bill.pdf
- “The Kentucky code reads”: https://codes.findlaw.com/ky/title-xi-revenue-and-taxation/ky-rev-st-sect-138-140.html
- “95 percent less hazardous”: https://www.gov.uk/government/publications/e-cigarettes-and-heated-tobacco-products-evidence-review/evidence-review-of-e-cigarettes-and-heated-tobacco-products-2018-executive-summary
- “US Surgeon General stated”: https://www.cdc.gov/tobacco/data_statistics/sgr/50th-anniversary/index.htm
- “number one tool”: https://www.bmj.com/content/358/bmj.j3262/
- “almost 9,000 die a year”: https://www.cdc.gov/tobacco/about/osh/state-fact-sheets/kentucky/index.html
- “one of the largest in the country”: https://www.ncsl.org/research/fiscal-policy/electronic-cigarette-taxation.aspx