It’s Time for Presidential Candidates to Weigh In on the Overregulation of Vapor Products
When the Office of Information and Regulatory Affairs (OIRA) designates that a federal regulation or rule is significant, or having an effect on the economy of more than $100 million, the agency must send a report to the Government Accountability Office (GAO) and both houses of Congress. This requirement was signed into law in 1996 in the form of the Congressional Review Act (CRA), and it allows legislators to introduce a resolution of disapproval to rescind a regulation. If successfully passed, the rule “may not be reissued in substantially the same form.”
Though the requirement to inform the GAO or Congress is often ignored, the requirement and important oversight authority of CRA do provide a legislative tool for Congress if it becomes necessary to provide a check on burdensome federal regulations.
The American Action Forum predicts that given the current House and Senate calendars, President Obama will have until May 17, 2016 to issue significant regulations without fear the next Congress and succeeding administration will use the CRA to repeal the regulations.
One such significant regulation is the Food and Drug Administration’s (FDA) proposed “deeming regulation” for electronic cigarettes and vapor products in the U.S. Without Congressional intervention, the FDA is poised to deem that these tobacco-free technology products be regulated like tobacco products under the Family Smoking and Prevention Tobacco Control Act. Predictions on the impact of this regulation range significantly, with some estimates suggesting that the cost of compliance would range from $2 to $10 million per product currently being sold to consumers. The total impact on the economy would far exceed the $100 million threshold for notice and Congressional oversight. This includes closed businesses, job losses, compliance costs, and a significantly negative public health impact in the short and long term.
The first and easiest way to address the yet-to-be-announced deeming regulation for vapor products would be to amend what is known as the “predicate date” for the introduction of what the FDA labels as tobacco products, including e-cigarettes. A House Resolution (HR 2058) sponsored by Oklahoma Congressman Tom Cole does just that, and has 51 Republican co-sponsors in the House. ATR supports this effort.
But given the inaction over this issue, it’s time for the next President to weigh in. Without Congressional action and assuming the FDA does finalize its deeming rule for vapor products, the next president will play an important role in potentially utilizing the CRA in conjunction with Congress to prevent the FDA from destroying thousands of small businesses and harming public health.
E-cigarettes are at least 95 and as much as 99 percent less harmful than combustible cigarettes. This is no small issue and deserves the attention of those seeking America’s highest office.
In testimony to the Senate Commerce Committee, Matthew Myers of the Campaign for Tobacco-Free Kids explained,
“Responsibly marketed and properly regulated, e-cigarettes could benefit public health if they help significantly reduce the number of people who smoke conventional cigarettes and become sick and die as a result.”
Where do Donald Trump, Gov.John Kasich (R-Ohio), Sen. Ted Cruz (R-Texas), Hillary Clinton and Sen. Bernie Sanders (D-Vt.) stand on the FDA’s attempt to kill the vapor product industry? To date, none of these candidates have weighed in.
Given the fact that the Centers for Disease Control (CDC) estimates that there were at least 9 million consumers of these products in 2014, silence on these issues may not be a sustaining political tactic.
Well played Grimm. Jesse from VapeMentors here.
Governor Cuomo’s Budget Proposal Stands to Destroy Market for Prescription Drug Innovation
In his 2016-2017 budget, Gov. Andrew Cuomo (D-N.Y.) recently proposed not only significantly intrusive disclosure requirements for the pharmaceutical and biotech industries but price controls on the drugs they sell to consumers. This proposal is the latest in a misdirected anti-free market campaign to get to the bottom of rising health care and prescription drug costs in the United States. It also stands to destroy the market for innovation in the prescription drug market.
Gov. Cuomo’s drug plan would task the state’s health commissioner with developing a list of prescription drugs for which “there is a significant public interest in ensuring rational pricing by drug manufacturers.” These manufacturers would be required to disclose the cost of developing, manufacturing, producing, and distributing the drug. Research and development costs would also fall under the list of mandatory disclosure items.
This unprecedented level of mandatory disclosure about the cost of developing, manufacturing, producing, and distributing prescription drugs will have significant impact on innovation for the companies producing life-saving drugs in New York.
The goals of these mandates have nothing to do with transparency and everything to do with government price-controls. Letting governments decide how much companies can charge for their products or harassing them with nanny-state disclosure requirements is a guaranteed prescription for the end of pharmaceutical innovation in the United States.
Research is expensive. Bringing a potentially life-saving prescription drug to market is expensive. After hundreds of millions of dollars and a decade of time spent developing a drug, the Food and Drug Administration (FDA) approves only 12 percent of potential medicines that enter clinical trials. Price-control caps on the after-trial cost of these drugs will serve one purpose, ending the free-market incentive to actually bring drugs to market for consumers and patients in need.
"Numerous economic studies indicate that price controls, by cutting the return that pharmaceutical companies receive on the sale of their drugs, also would reduce the number of new drugs being brought to the market. So, a short-run benefit for consumers could lead to a long-run negative impact on social welfare."
The New York legislature should reject Gov. Cuomo’s misguided crusade against prescription drug and biotech companies and focus it’s effort on driving down health care costs which have increased as a direct result of government intervention in the health care market. That begins with reform to the state's Medicaid program and a pairing back of Obamacare’s mandates on health insurance providers and plans.
ATR Opposes Using Tax Hikes to Fix West Virginia's Overspending Problem
With less than two weeks remaining in West Virginia's 2016 Regular Legislative Session, budget work continues as part of an effort to address a $400 million overspending problem in this fiscal year. The new Republican majority has made great strides in protecting taxpayers and workers in the Mountain State this year, passing a repeal of the state prevailing wage law and making West Virginia the 26th Right-to-Work state.
In the final days of session, however, taxpayers remain at risk. In his 2016 budget, Gov. Tomblin (D-W.Va.) proposed a number of tax increases on tobacco and tobacco-free smoking cessation products, including a 45-cent-per pack cigarette tax. The state Senate amended and passed that plan, in the form of Senate Bill 420, increasing the state cigarette tax by $1-per pack, which would make the state rate $1.55-per pack. This is a misguided approach to fixing an overspending problem and will only create more volatility in the budget in the long term.
As Grover explains in his letter to the legislature:
"Targeted excise taxes have proven to be unstable sources of revenue, and ultimately can cause a reduction in tax receipts. Increasing the state¹s reliance on tobacco taxes by increasing them by $1 per pack will not necessarily generate more revenue in the long term. When Illinois nearly doubled its cigarette tax in 2012 by raising the tax $1-per-pack; it generated $138 million less than projected. A reduction in tax receipts is a common occurrence amongst cities and states that attempt to discourage consumption with higher costs. In fact, only three out of the 32 state tobacco tax increases, enacted between 2009 and 2013, have met or exceeded tax revenue projects."
Those in the public health community have a good reason to be concerned with SB 420 as well.
"Anti-smoking activists and public health advocates should be concerned about the next target of tax hikes contained in SB 420: electronic cigarettes and vapor products. These tobacco-free technology products are helping tens of thousands of smokers make the transition to far healthier alternatives. By imposing a 7.5-cent per mL tax on e-cigarettes and retroactively requiring taxes to be paid on store inventory, this punitive tax is both anti-health and a shameless cash grab.
One vape shop owner in Monongalia and Harrison counties has already stated that this would cost him between $30,000-$50,000 up front. It is reckless to destroy with tax hikes small businesses accomplishing what tax hikes on cigarettes never could, getting people to quit smoking.
Taking aim at e-cigarettes with higher taxes works against efforts to reduce the harm associated with smoking. A number of studies have shown that electronic cigarettes can improve health and prevent disease. By choosing to "vape" e-cigarettes, consumers get their nicotine fix without the combustion and smoke, which are responsible for many of the negative health effects of tobacco cigarettes. A Public Health England study found that e-cigarettes are 95-99% less harmful than tobacco cigarettes. The legislature should reject raising taxes on healthier, life-saving products."
Another piece of legislation that recently passed the House Finance Committee by a voice vote, risks being used as a Trojan Horse for a tax increase. House Bill 2704 would broaden the list of products and services subjected to the state sales tax and lower the rate from 6 percent to 5.5 percent at the end of 2016.
As Grover explains in his letter to the House of Delegates:
"HB 2704 represents a step in the right direction because it broadens the base of products and services subjected to the sales tax while lowering the rate overall. Principally, this is what conservative tax reform looks like. Caution must be taken, however, to ensure that HB 2704 is revenue neutral, if static scoring is applied, where economic growth is not considered. If dynamic scoring is applied, it is likely that this legislation would generate more revenue for the state in the long term and that would not constitute a tax increase because it is accomplished through growth.
If the broader sales tax rate is not reduced to a rate that makes this a revenue neutral bill, voting for it will constitute a violation of the Taxpayer Protection Pledge, the written commitment many lawmakers have made to their constituents to oppose tax increases."
UPDATED: Map of Pending Tax Threats to Vapor Products in the States
On the day of an overwhelmingly bipartisan Senate confirmation of President Obama's pick for Food and Drug Administration (FDA) commissioner and on the heels of a House budget hearing for the FDA, it's important to examine the fights taking place against government overreach at the state level as well. The most significant of which includes the ongoing attempt by the so-called public health community and money-hungry lawmakers to raise taxes on electronic cigarettes and vapor products.
*As of today, 11 states are still considering imposing excise or "sin" taxes on e-cigarettes, a policy prescription that Americans for Tax Reform fundamentally opposes in every state with ongoing threats. E-cigarettes are not only tobacco-free technology products; they are actually effective smoking cessation tools and helping thousands of Americans quit smoking. Politicians should not only reject efforts to raise taxes on e-cigarettes; they should publicly embrace and celebrate the growth of the industry.
*Updated on March 22.
Grover Norquist on C-SPAN: Vaping and the Changing Electorate in 2016
In an interview with Washington Journal on C-SPAN this morning, ATR president Grover Norquist discussed a wide range of topics, including President Obama’s final budget request, the tax and budget plans put forth by 2016 presidential candidates and the changing electorate that may determine the outcome of the election.
In this 4-minute excerpt, Grover discusses the minimum wage, Hillary Clinton’s 25% tax on guns, homeschooling, Uber, eBay, and vaping.
Grover explains that a lot of the thinking behind new regulations and taxes comes from outdated laws and understandings of the economy and its consumers. Such is certainly the case with vaping. The Food and Drug Administration (FDA) is finalizing rules that will subject tobacco-free technology products, electronic cigarettes, to a tobacco regulatory network. This may impact the presidential race, for those who fail to understand this problematic approach to governing.
“Freedom issues that run up against old laws that don’t make any sense anymore and each of these expanding freedoms have changed the nature of the electorate.”
On vaping, Grover explains:
“Our liberal friends want to tax, regulate and in fact have announced that they want to have a prohibition, like we did with liquor, on vaping. The FDA’s moving towards that.”
Podcast: Taxes and Regulations Will Stifle Growth of Life-Saving Electronic Cigarette Industry
In a recent episode of the Tech Policy Podcast with Tech Freedom, Americans for Tax Reform's Paul Blair discussed the pending federal regulations that stand to cripple the electronic cigarette and vapor product industry. Discussions include the public health benefits of e-cigarettes, efforts in the states to raise taxes on them, and the status of looming regulations by the Food and Drug Administration. What's next? Who is impacted? What can vapers do? All of this and more in Episode 17 of the Tech Policy Podcast.
ATR Hosts Small Businesses From Around Country to Discuss the Politics of Vaping
Last week, Americans for Tax Reform hosted small businesses from around the country for a happy hour to discuss “the politics of vaping.” Over 100 members of the Smoke-Free Alternatives Trade Association (SFATA) were in Washington, D.C. meeting with members of Congress in an effort to convince them to curb the implementation of the Food and Drug Administration’s regulatory assault and pending “deeming rule” on the sale and availability of electronic cigarettes and vapor products.
ATR President Grover Norquist with SFATA President Cynthia Cabrera
These tobacco-free technology products have faced an onslaught of tax and regulatory threats throughout the country. This, despite the fact that a recent government-funded study found that e-cigarettes are at least 95 percent less harmful than combustible tobacco cigarettes.
Beyond the policy issues the industry and its consumers face, ATR president Grover Norquist discussed the political implications of threatening the 9 million plus adult vapor product consumers in the context of the 2016 elections.
"I think that the next election, at the presidential level, and a lot of other levels, is going to be determined by the vaping community," said Grover. "Lifestyle issues win because of the power of the political support behind them," he said.
The Washington Examiner's Paul Bedard wrote about the event here. Quoting Grover, Bedard wrote:
"Vaping is not a product. It is a movement. It is a community, it is a political movement in support of a community and it's changing the country in very good ways," [Grover] said at a reception during a two-day lobbying effort on Capitol Hill by the association last week.
At the federal level, Congressional Democrats have stood in the way of a minor rule change that would allow the thousands of U.S. small businesses helping combustible cigarette smokers quit to continue doing so. Without action, the pre-market review and regulatory process required of these businesses would be unaffordable and some estimate it would equate to prohibition for 99 percent of the market. It should be noted that the pending regulation does not necessarily regulate the market; it simply requires businesses obtain permission from the FDA to continue to sell products to consumers.
Efforts to Raise Taxes on Electronic Cigarettes Persist in 2016
One year ago this week, ATR's Patrick Gleason and I outlined the threat electronic cigarettes and vapor products faced during the 2015 state legislative sessions over new and higher taxes. At the conclusion of last year, state governments considered legislation to subject these new technology and tobacco-free products to excise or "sin" taxes in half the country and the District of Columbia. This was up from 15 the year prior, in 2014.
As we explained, "Where some see a new technology that is helping people quit smoking, cash-hungry politicians see a new target to tax."
Contrary to claims by some, the fight to tax, and in many cases, regulate this new product category has never been about public health. In a piece for National Review, ATR president Grover Norquist and I outlined the fraud of such justifications for the prohibitionist movement against vapor products.
"The same people who spent years demonizing smokers and cigarettes turned around and gleefully pushed for new programs and spending projects with the revenue they were able to extract from consumers... Budgets, though, rely on this significant revenue stream. Here the fraud that has always been the public-health push for cigarette taxes is exposed, in their quest to tax e-cigarettes out of existence."
These legislative threats have always been about protecting the government's stream of sin tax revenue extracted from smokers. Every price increase on vapor products provides a reason for a smoker to not make the switch to healthier alternatives. This is exactly what some money-hungry legislators want.
So what about 2016? As state legislative sessions heat up, so too have efforts to raise taxes on electronic cigarettes. Below is a map showing which states currently subject the products to excise, or sin, taxes and states where legislation has been filed or defeated as well. Click here for a larger version of the map.
Legislation to raise taxes on electronic cigarettes has already been filed in Alaska, Hawaii, Iowa, Kentucky, New Jersey, New Mexico, New York, Virginia, Washington, and West Virginia. A ballot initiative is pending in California. More legislation is likely to be filed in the coming days and weeks.
Four states and the District of Columbia currently impose an excise tax on e-cigarettes and vapor products. They include Minnesota (95% wholesale), North Carolina (5 cents per mL), Louisiana (5 cents per mL), and Kansas (20 cents per mL).
Five localities also impose an excise tax on the products. They include Cook County, Illinois (20 cents per mL), Chicago, Illinois (55 cents per mL), Montgomery County, Maryland (30% wholesale), Juneau, Alaska (45% wholesale), ad Matanuska-Susitna, Alaska (55% wholesale). The mayor of Mat-Su actually vetoed the City Council's tax increase, only to have it overridden on a 5-2 vote soon after.
E-cigarettes are at least 95% less harmful than traditional combustible cigarettes. Efforts to raise taxes on these smoking cessation devices work at cross purposes with efforts to cut down on the harm associated with smoking. This is one of the reasons we at Americans for Tax Reform oppose efforts to raise taxes on the products.
ATR Opposes Indiana House Bill 1001
In the midst of a $2 billion surplus, Indiana House Speaker Brian Bosma (R-88) has demanded that tax hikes be included in the budget as part of a broader transportation package. His plan stands in stark contrast to Gov. Mike Pence's (R-Ind.), which generates $1 billion in revenue for transportation without raising taxes. In fact, in his State of the State speech, Pence urged the legislature to invest in roads and bridges, "without raising taxes."
House Bill 1001 has been filed and awaits a vote in the House Transportation Committee, where if it passes, will be sent along to the House Rules Committee. The bill seeks to raise the gasoline tax by 4 cents per gallon and index it to inflation, setting on auto-pilot a gas tax hike in perpetuity. It also would raise the state cigarette tax by $1-per-pack. These tax hikes target commuters and low-income consumers who can least afford it.
In response to his effort to raise taxes by hundreds of millions of dollars annually, Americans for Tax Reform president Grover Norquist sent a letter today to the Indiana House of Representatives outlining ATR's opposition to efforts to raise Indiana state gasoline and cigarette taxes.
The letter can be read here:
"On behalf of Americans for Tax Reform and our supporters across the Hoosier State, I encourage you to reject efforts to raise gasoline and cigarette taxes. These tax hikes on commuters and low-income consumers represent a reckless approach to budgeting, especially in the midst of a $2 billion budget surplus. Voting for House Bill 1001 or any bill that raises new revenue for the state would constitute a violation of the Taxpayer Protection Pledge.
First, every dollar extracted from commuters in the form of excise or sales taxes on gasoline should already be used for transportation needs. It is contrary to the expectation of consumers to divert any portion of the state sales tax on gasoline towards priorities that are not related to transportation. Any and all discussions about transportation should immediately and permanently codify the earmarking of gas tax revenue to new and existing transportation projects.
Proposals that seek to index the gas tax to inflation put tax hikes on autopilot and remove from the budget process the responsibility and accountability associated with annual decisions about tax rates. A national public poll last year found that 79% of Americans oppose an increase in the gasoline tax to keep up with inflation and 68% oppose any increase in the gas tax to spend more for infrastructure.
Consumers oppose gas tax increases, whether they are 4 cents per gallon or in perpetuity to keep pace with inflation, because they rightly believe that there is more than enough currently collected revenue to fund a state’s transportation needs. Reasonably and low-priced gasoline allows people to spend more on groceries and other necessities, including long-term investment savings.
Gas taxes are not “user fees.” To qualify as a fee, a consumer must have the choice to purchase the service from the government (and pay the fee) or to purchase the service from a private business. Because anyone who purchases gasoline in Indiana must pay the tax, they are not considered user fees. Tolls are user fees, however, because commuters have the option of using the roads they are levied upon or not.
In total, the gas, special fuels, and motor carrier surcharge tax hikes proposed in HB 1001 represent nearly $730 million in tax hikes through 2020. In his State of the State address, Governor Pence urged the legislature to “invest in roads and bridges…without raising taxes.” I agree with the Governor.
The current draft transportation package also seeks to raise the state cigarette tax by $1-per pack, representing $277.4 million in tax hikes annually. Tobacco taxes not only disproportionately harm low-income consumers and small businesses but are also a volatile revenue source.
Contrary to the claims made by organizations like Hoosiers for a Healthier Indiana, extensive studies suggest that inflicting higher cigarette taxes on consumers will superfluously punish the poor without reducing smoking. As a result of regressive cigarette taxes, many smokers minimize the impact of cigarette tax increases by seeking out lower priced or untaxed cigarettes, or smoking fewer cigarettes more intensively.
Increasing the Hoosier State’s dependence on tobacco taxes by increasing them by $1-per-pack will not guarantee more revenue in the long run. As demonstrated by many states and cities across the nation, targeted excise taxes have proven to be unstable sources of revenue, and ultimately result in a decrease in tax receipts. For example, neighboring Illinois nearly doubled its cigarette tax in 2012 by raising the tax $1-per-pack; it generated $138 million less than projected. In fact, only three out of the 32 state tobacco tax increases, enacted between 2009 and 2013, have met or exceeded tax revenue projects.
Currently, Indiana has a regionally competitive cigarette tax rate of $.995-per pack. It is higher than Kentucky’s $.60-per pack tax and makes Indiana a net exporter of cigarettes to states like Illinois, which boasts the city with the highest state-local tax rate of $6.16-per pack in Chicago.
If enacted, this tax would likely incentivize cigarette smuggling and cross-border sales into states like Kentucky. According to the Tax Foundation, when Illinois almost doubled the cigarette tax rate, cigarette smuggling rate dramatically increased from 1.1 percent to 20.9 percent in the first year. Consequently, small businesses in this state lost tens of thousands of dollars as patrons pursued cigarettes in less expensive markets across state lines, including in Indiana.
Ohio’s 2015 cigarette tax hike has already been a boon for Kentucky. According to Kentucky Budget Director John Cilton, Ohio’s recent 35-cent increase in cigarette taxes has already resulted in an increase in tax receipts in northern Kentucky. The legislature should keep this in mind as it considers a cigarette tax hike in Indiana.
I urge you to resist efforts to raise taxes, especially on those who can least afford it. It’s not just bad policy; it’s fiscally irresponsible to harm state small businesses in an attempt to reap funds from volatile revenue sources like cigarette sales."
Governor Doug Ducey: “We Will Lower Taxes This Year. Next Year. And the Year After.”
Today, in his second State of the State Address, Gov. Doug Ducey (R-Ariz.) announced, “the state of the state isn’t just strong – it’s on the rise.” This optimism stands in contrast to a less than favorable outlook inherited by the governor. Just one year ago, Ducey inherited more than a $1.52 billion overspending problem for the 2015-2016 years to come.
As a 2014 candidate for governor, Ducey “vowed to not raise taxes or postpone a $226 million corporate tax-cut package” that was to be phased in over the next three years. He kept that promise in year one, despite immense pressure from special interests. Just two months into his first legislative session, he signed a “historically lean $9.1 billion Arizona budget… without raising taxes.”
In his 2016 State of the State address, Ducey mentioned taxes or taxpayers eight times. Here are a few mentions:
“When it came to balancing our budget, we were told: It just couldn’t be done. Not, without raising taxes. But we weren’t going to make the people of Arizona pay for the failings of politicians. So we got the job done, and instead of raising taxes, we lowered them.”
Ducey announced that he would be releasing his budget this Friday, “and the big spenders and special interests aren’t going to like it.”
On the budget, he noted:
“It eliminates waste. It’s balanced. And most importantly, it does not raise taxes. Now, I understand that it’s unusual for elected leaders to keep their promises, but let me assure you: I intend to keep mine.
Together, we will lower taxes this year. Next year. And the year after.”
The governor’s commitment to annual tax cuts is an important one given the scheduled phase-in of annual corporate rate reductions, reductions that some have called for postponing. Doing so would have constituted a tax increase, as the tax cuts are scheduled as a matter of existing law. Over the next two years, the state’s corporate rate will decrease to 4.9 percent.
Absent top rate reductions elsewhere, Arizona’s 4.9 percent corporate tax rate will make the state rate the fourth lowest top rate in the nation, behind Colorado (4.63 percent) North Dakota (4.31 percent), and North Carolina (4 percent). North Dakota cut its rate by 5 percent in 2015 and North Carolina’s rate is on a path to go to 3 percent next year. 6 states do not levy corporate income taxes.
Here are a few of his best lines:
"A year later, the big spenders who told us we couldn’t balance the budget, are beating the drum -- celebrating our hard work with plans to spend and party like it’s 1999. Some people never learn, no matter how much their heads hurt in the morning.
Someone needs to be the voice of sobriety. So when they bring out the punch bowl, I will be here to say ... once again... Not on our watch."
On Barry Goldwater and the number of bills Ducey saw and read in 2015:
"Last year, 1,163 bills were introduced. 344 crossed my desk, and 324 became law. I enjoyed reviewing all of them – yes, even the ones I didn’t sign. But sometimes, as the saying goes…if you want to learn something new, you need to read something old.
As Barry Goldwater wrote in ‘Conscience of a Conservative,’ “my aim is not to pass laws, it’s to repeal them.”
On unnecessary regulations?
“Send me legislation to allow agencies to wipe them out, easier and faster. And I’ll sign it.”
On unnecessary occupational licenses?
"Believe it or not, the state of Arizona actually licenses talent agents. I say, let’s leave the job of finding new talent to Adam Levine and Gwen Stefani – not state government.
The elites and special interests will tell you that these licenses are necessary. But often they have been designed to kill competition or keep out the little guy. So let’s eliminate them."
As a supporter of the free market and services like Uber and Lyft, the governor even created a “Council on the Sharing Economy” just before giving his remarks. Read the entire address here.