As the summer session of the North Carolina legislature heats up, an omnibus tax bill is up for consideration that makes a few tax adjustments in the year following the historic tax reform package signed into law by Governor Pat McCrory.
The House recently passed H.B. 1050,which among other things includes a 5-cent per milliliter tax increase on e-cigarettes and vapor products, which contain liquid nicotine. The companion bill is S.B. 763 and both bills await consideration in the Senate.
Vapor products and e-cigarettes are already taxed at a sales tax rate of between 4.75 and 8.25 percent. Imposing an additional tax on these products will hurt North Carolina vapor companies and small businesses struggling to make ends meet. This is especially true of convenience stores, which have begun to rely on these products more heavily to replace revenue lost from declining sales with tobacco products.
While the overall bill may be revenue neutral, imposing additional taxes on these innovative products will chase business out of the state and onto the Internet, which is already a significant market for e-cigarette and vapor products.
Taking aim at e-cigarettes also works at cross-purposes with efforts to cut down on the harm associated with smoking. A number of studies have shown that electronic cigarettes stand to improve health and prevent disease. By choosing to “vape” e-cigarettes instead of smoking traditional tobacco, consumers get their nicotine fix without the combustion and smoke, which are responsible for many of the negative health effects of tobacco cigarettes.
A new study funded by the charity Cancer Research UK published in the journal Addiction found that smokers trying to quit are 60 percent more likely to report success with e-cigarettes than with any other method. With e-cigarettes, the free market has provided a solution to a problem that social engineers have not been able to address through stiff government regulations.
Last year, the legislature passed the most significant tax reform package of any state in years. It brought tax relief to millions while reversing decades of taxes going in one direction: up. Though these two companion bills are not violations of the Taxpayer Protection Pledge, they do take a step in the wrong direction.
Other states, including Washington, Oregon, Hawaii, Massachusetts, and Vermont have all rejected efforts this year to raise taxes on e-cigarettes and vapor products. That’s because of the harmful impact on small businesses and concerns about public health. For these reasons, the vapor tax portions of HB 1050 and SB 763 should be stripped from the bills and considered individually, so that all sides can have an opportunity to debate the merits of the proposal.