ATR Supports Predicate Date Change in the Tobacco Control Act
The U.S. House Committee on Appropriations will begin markup on the 2017 Agriculture Bill tomorrow, representing a significant opportunity to halt the Food and Drug Administration’s (FDA) overregulation of vapor products in the United States. An amendment to the bill, proposed by Rep. Tom Cole (R-Okla.) will change what is known as the “predicate date” for tobacco products that have hit the market since February of 2007.
This is significant for a number of reasons. First, the Tobacco Control Act (TCA) established an arbitrary date of February 15, 2007 of which all tobacco or tobacco-derived products must establish existence in the market in order to avoid an expensive, if not impossible regulatory pre-approval process within the FDA. This was essentially intended to prevent new tobacco products like cigarettes from hitting the market without pre-approval, which would likely not ever occur.
Unfortunately, innovation has encountered an outdated regulatory code and trapped life-saving smoking cessation products in the mix.
Tobacco-free electronic cigarettes and vapor products did not exist in any commercialized form in 2007, signaling that it was not the intent of the Tobacco Control Act to regulate these products in a similar manner. Unfortunately, because the nicotine contained in many vapor products comes from tobacco plants, the FDA has asserted regulatory authority under the TCA covers these products as well.
As such, an effort underway by Rep. Cole would change the arbitrary 2007 date to the date at which the FDA announces its “deeming regulation,” where they deem vapor products as tobacco products, for regulatory purposes. This common sense change to the Tobacco Control Act would ensure that products already being sold to millions of consumers in the United States would remain available and affordable for adults. Absent a change in this date, the most significant advancement in public health in decades will be stifled by government.
The growing body of scientific evidence suggests that vapor products are at least 95% and as much as 99% less harmful than combustible cigarettes. Both Matt Meyers of the Campaign for Tobacco Free Kids and Mitch Zeller of the FDA’s Center for Tobacco Products have made statements suggesting their understanding of the opportunity for risk mitigation as well.
Matt Meyers, in 2014 testimony to the Senate Commerce Committee: “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.” He explained further that if properly regulated, “I don’t think there is any doubt that there would be a reduction in harm,” from smokers who switched to e- cigarettes.
Mitch Zeller: “If we could get all of those people [who smoke] to completely switch all of their cigarettes to noncombustible cigarettes, it would be good for public health.”
Absent a Congressional change in the predicate date, only large tobacco companies will be able to afford the compliance costs associated with obtaining pre-market approval within the FDA to sell electronic cigarettes. The millions of dollars necessary to undergo this expensive regulatory process will halt innovation, and put most small businesses out of business, striking a significant blow to public health.
A change in the predicate date will do nothing to prevent the FDA from regulating the product category with reasonable requirements like ingredient disclosure or the establishment of good manufacturing practices. It will simply permit innovation to exist to the benefit of most consumers and small businesses in the industry.
Oklahoma Lawmakers Playing Primary Politics with Tax Hikes
In a stunning admission of tactics surrounding an effort to raise taxes in the Sooner State, Gov. Mary Fallin (R-Okl.) recently acknowledged that state lawmakers are postponing a public vote on her proposed tax hikes until after the candidate filing deadline has passed.
"I think there are some members who are waiting to see if they draw an opponent during filing in April," Fallin said when asked about ongoing negotiations with the House and Senate on the budget. "They're slow playing things."
The entire House and half of the state Senate is up for re-election this year, with a candidate-filing deadline coming up on Friday. In a letter to lawmakers yesterday, ATR president Gover Norquist expressed opposition to this tactic:
“It is beyond reprehensible that legislators are postponing an open debate on the budget until they’re sure to get re-elected this year. Only cowards hide from voters when passing tax hikes on them in the dark of night.”
In February, Gov. Fallin proposed a number of tax hikes, including an expansion of the state sales tax ($200 million tax increase) and tobacco taxes ($182 million tax increase), tax hikes that ATR opposed. Fallin's support for these efforts constituted a violation of the Taxpayer Protection Pledge, a written commitment that she made to Oklahoma voters when she was elected as governor in 2010.
Fortunately, the Oklahoma Constitution requires a ¾ vote by both legislative chambers and the signature of the governor to pass tax increases. Unfortunately, the threshold for referring a tax hike to the ballot only requires a simple majority. Voting to refer a tax hike to the ballot constitutes a violation of the Taxpayer Protection Pledge unless voters are also provided the option of reducing their taxes at the same time.
ATR will continue to monitor these efforts in the coming days and weeks.
Clarification on ATR's Support for Solar Market Reform Efforts in Maine
In 2015, the Maine legislature passed a bill that required the development of an alternative pricing model for solar customers in the state by the end of 2016. Legislators have been working with the private sector over the past year to meet that mandate. At the crux of this debate is a policy and problem in the energy market know as net metering.
In a November 2013 article entitled "Cautionary Tale About Solar Energy" for the Maine Wire, I explained:
"When a solar customer generates more power than they immediately need, utilities pay the customer for the power that is sent back onto the energy grid. A customer’s electricity meter spins backwards and the customer’s power bill is credited.
When the sun goes down, however, solar customers need energy to keep the lights on and thanks to a well maintained power grid and power generation stations, energy flows back to homes with solar units. The utility pays a higher retail rate for the energy they get from homeowners, creating a system where solar customers aren’t paying their fair share for energy use.
The result of net metering is that traditional energy consumers end up subsidizing the use of solar power by their neighbors, as those costs are shifted to non-solar consumers. This is a problem.
The Associated Press recently reported that "Grover Norquist Supports Maine Solar Bill" without providing the whole story. ATR did weigh in on the effort to address net metering in Maine, in a letter to lawmakers on the Maine Committee on Energy, Utilities, and Technology.
ATR did not endorse a specific piece of legislation. In fact, we noted,
"The proposal to increase the cap on solar power generation in Maine over the next 5 years without substantially changing the inherent cost shifting for current customers is somewhat concerning. "
We did, however, outline our support for ending or preventing the cost-shifting inherent in net metering, which the current legislative compromise does for future consumers.
ATR's support for specific reforms contained within a compromise (like ending any sort of net metering for customers after a specific date) does not equate to supporting every element of that compromise. This important distinction was ignored by the Associated Press.
Chris Rauscher, the director of public policy for Sunrun Inc., a massive solar company that pushes for the crony capitalism inherent in state solar energy market policies has expressed concerns with the compromise for the very reasons ATR supports elements of it. It puts in place an end to net metering, despite not doing so soon enough.
He recently explained that his company would, "continue to fight for net metering as an option in the bill. He said net metering is the best way to ensure that solar customers receive a return on their investment."
I write today in support of efforts to address the consumer cost shifting inherent with net metering policies for solar power customers in Maine. Without this important reform - in the long term - traditional energy consumers will continue to subsidize the use of solar power by Maine customers who are not paying for their use of the energy grid.
Generous state and federal tax credits and subsidies have resulted in a large number of electric utility customers installing rooftop solar and other distributed generation (DG) power sources on their homes and businesses. Because on-site power storage remains to be cost-prohibitive, these customers rely heavily on the energy grid for power in inclement weather, at night, and when they generate excess power, which is sent back onto the grid.
Utilities are required to compensate these customers at the retail rate of power when this power is sent to the grid. As a result, rooftop solar and DG customers have their power meter rolled backwards (net metering) and utility companies are forced to pay customers at a much higher rate than it cost them to produce that energy by traditional means. The retail rate of electricity paid by traditional consumers includes the cost of building and maintaining the electric grid. In Maine, solar and DG customers are therefore not paying for their use or the maintenance of the grid.
The legislative compromise to address this problem isn’t perfect but it takes a step in the right direction.
The proposal to increase the cap on solar power generation in Maine over the next 5 years without substantially changing the inherent cost shifting for current customers is somewhat concerning. On the plus side, as new customers sign up, the contract price set by the Public Utilities Commission paid would decrease as the level of installation grows and the cost of solar installation declines. This introduces somewhat of an equitable and free market-oriented ratchet down compared to net metering policies.
The greatest benefit of the current compromise before the legislature is that if the new program is successful, net metering will not present the cost-shifting problem to the energy market for future solar customers, as it will not be available when certain benchmarks for capacity generation are met. The result is less volatility in the state solar and Maine’s overall energy market.
Americans for Tax Reform applauds efforts by the legislature to address the problems solar power generation presents to Maine energy consumers.
President, Americans for Tax Reform
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.
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.