Electronic Cigarettes Should Not Be Taxed as Tobacco Products
As nineteen states begin the 2015 legislative session this week, a hot topic of debate will be what to do about a new innovative technology that is gaining popularity among smokers looking for a way to quit. Electronic cigarettes (e-cigarettes) and vapor products have grown to a 2.5 billion dollar industry over the past few years, a concern for big government folks who want a piece of the action.
As the Food and Drug Administration (FDA) and Democrats figure out how to regulate and tax the products, states haven't sat around waiting to see what happens in Washington, D.C.
Countless pieces of legislation in 2014 lumped e-cigarettes and vapor products into a the taxable category of “other tobacco products.” This would have subjected them to taxes as high as 95 percent of wholesale cost, which is how they are taxed in Minnesota. Every single one of the 2014 bills failed with the exception of one signed into law in North Carolina, which imposed a much smaller (but higher than present law) tax of 5 cents per mL of liquid per product (about 2.5 cents per e-cigarette).
E-cigarettes have been found to be far less harmful than traditional tobacco cigarettes. These products don't contain tobacco. That’s precisely why e-cigarettes should not be subjected to the same level of taxation as cigarettes, cigars, or any other type of smokeless tobacco. Tax increases that raise the price of e-cigarettes for consumers will discourage smokers from switching, an illogical act for anyone concerned about public health. State budget shortfalls fueled by overspending problems should never justify tax increases that will hurt decades of efforts to curb smoking in the United States.
Unfortunately, at least seven states already have bills pre-filed or drafted that would raise taxes on e-cigarettes. The governors of Washington and Utah have included tax hikes on the products in their official budgets to the legislature. The Attorney General of Indiana is pushing the legislature to raise taxes as well. Americans for Tax Reform opposes all tax increases and will work to defeat them as they arise.
Join our email list on the right hand side of this page or click here to contribute to our efforts to fight e-cigarette and vapor tax hikes in 2015.
Governor Jay Inslee Proposes Billions of Dollars in Tax Hikes in 2015 Budget
Today, Washington Governor Jay Inslee (D) released a two-year budget that includes a wide range of tax hikes on industries, individuals, and small businesses. Faced with a $2 billion overspending problem, unlike countless states throughout the US who have reined in spending, the governor has resorted to a typical answer from politicians who refuse to reform government: billions in higher taxes.
Here is a list of the tax hikes:
Capital Gains Tax: This 7 percent tax on earnings from the sale of bonds, stocks, and other assets above $25,000 would begin in 2016. The size of this tax hike is 798 million dollars and will hit an estimated 32,000 taxpayers.
Carbon Tax: The Carbon Pollution Accountability Act would impose a misguided cap-and-trade regime in Washington, generating $1 billion annually according to the governor. On the issue, California Governor Jerry Brown said, “This is global. So if it’s only Oregon, Washington, California, and British Columbia, nothing’s going to happen.” He's right. As developing countries exponentially increase their emissions, there isn’t much a few states can do to lower overall global emissions. The clear impact of cap-and-trade, however, is an increase in the cost of electricity.
Peter Orszag once noted that electricity “price increases are essential to the success of a cap-and-trade program.” Cap-and-trade is regressive and hits hardest poor and middle-income households who spend more of their paychecks on energy.
Cigarette Tax: The governor’s proposal increases the state cigarette tax from $3.025 by 50 cents, which would make cigarettes sold in Washington subjected to the second highest cigarette tax rate in the nation, only behind New York. The governor projects this will generate $37.8 million dollars over the next two years. Unfortunately for Inslee, higher taxes don't always generate more revenue for the state. The Washington Department of Revenue estimates that the state lost about $376 million in tax revenue in 2012 due to tobacco tax evasion, with more than one third of cigarettes in Washington being contraband. This tax hike makes that even more likely going forward. Indian tribes in Washington are exempt from imposing or collecting the tax altogether.
E-Cigarette and Vapor Tax: Reviving a failed 2014 proposal, the governor has proposed a massive 95% tax at the point of sale on e-cigarettes and vapor products sold in Washington. The governor projects this will generate $18.1 million up through 2017 and another $78.4 million over the following two years. This is clearly intended to prevent smokers from switching to vaping in an effort to protect the state’s monopoly on cigarette tax revenue.
Tax Credits and Deductions Repeal: The governor proposes eliminating five tax exemptions, which also constitute as tax hikes. Repealing the sales tax exemption for trade-ins generates $105 million, use tax exemption for fuel $51 million, sales tax refunds $52 million, tax exemption on bottled water $44 million and the B&O tax rate for royalties $30 million, constituting a roughly $282 million tax hike overall over the next two years.
Gov. Inslee also proposes extending a number of small tax credits, netting a projected loss of $94 million up through 2017.
In his 2012 campaign, Inslee said he wouldn’t raise taxes. He said at the time, “I would veto anything that heads the wrong direction and the wrong direction is new taxes in the state of Washington.” The Seattle Times said he was “solidly on the record” on this issue. He wouldn’t, however, put it in writing by signing the Taxpayer Protection Pledge to Washington voters. Faced with what he calls a “massive hole left by the Great Recession” Inslee hasn’t been successful in following in the footsteps of Governors who have not only recovered from the Recession but are thriving in its aftermath as a result of cutting taxes and reforming government spending programs.
The legislature should reject all of these tax hikes and work to reform education, transportation, and other priorities in a more reasonable way.
Susan Stimpson Signs Taxpayer Protection Pledge in Bid to Defeat Virginia House Speaker
Former Stafford County Supervisor Susan Stimpson has signed the Taxpayer Protection Pledge in her bid for the Republican nomination in the 28th District of Virginia. The Pledge, sponsored by Americans for Tax Reform, commits signers to oppose any and all efforts to increase taxes.
Americans for Tax Reform offers the Pledge to all candidates for state and federal office. Fourteen governors and over 1,000 state legislators have signed the Pledge. To date, Stimpson is the only candidate in the 28th district to sign the Pledge to Virginia taxpayers.
Serving as county supervisor from 2010 through 2013, Stimpson oversaw the elimination of the business, professional, and occupational licensing tax in Stafford County. She also cut property taxes, zeroed out a tax service district, eliminated impact fees and cut county staff back to 2004 levels.
“I want to congratulate Susan Stimpson for taking the Taxpayer Protection Pledge. Virginians deserve better than tax-and-spend policies that fall hard on the backs of hardworking families and small businesses. They want real solutions that create jobs, cut government spending, and incentive more economic growth,” said Grover Norquist, president of ATR.
“By signing the Pledge, Susan Stimpson had demonstrated that she understands the problems of hard-working taxpayers in Virginia.”
“Bill Howell is a serial tax hiker who refuses to take tax hikes off the table. He has teamed up with Democrats in Virginia on numerous occasions to raise taxes by billions of dollars, which is what politicians do instead of reforming government. While Republicans in North Carolina were enacting historic tax reform, Virginia was gaining prominence as the state experiencing the worst Recession recovery of any state in the region, precisely because of its dependence on the federal government and the legislature’s unwillingness to lessen the burden of government on Virginia taxpayers and small businesses.”
Susan Stimpson's record stands in stark contrast to that of her opponent, the tax-and-spender Bill Howell. Howell sponsored and oversaw the passage of House Bill 2313 during the 2013 session, in which an additional burden of $1.23 billion per year was imposed on Virginia small businesses and families. From the sales tax to property taxes, hotel taxes, a car tax hike, and a massive gas tax hike that takes effect in 2015, Howell had his hands in all of it.
In a self-righteous opinion editorial, the Washington Post dumfoundedly proclaimed that “Virginia’s Republican House speaker stands accused of insufficient conservatism.” They said, “Ms. Stimpson is a paragon of the party’s free-lunch crowd, which insists that, perhaps through magical thinking, Virginians can somehow avoid paying for the roads, rails and bridges they use.”
This pathetic oversimplification of Stimpson’s candidacy comes as little surprise those who worked to defeat Bill Howell’s transportation tax hike in 2013. In her role as county supervisor, Stimpson was forced to budget within the means of the money provided to the county. This is something Howell simply was unable to do when he was lobbied by the Chamber of Commerce, construction industry, and big spenders in Richmond.
When Bob McDonnell stabbed taxpayers in the backs in 2013, it was Speaker Bill Howell who twisted the knife. With their votes, residents of the 28th House district may return the favor next spring.
E-Cigarette Tax Hike Press Conference and Drinks This Sunday at Bridget Foy's in Philadelphia
The Philadelphia City Council is considering a new tax on e-cigarettes and vapor products on the heels of a $2-per-pack cigarette tax hike that recently went into effect. Join Philadelphia vapers, e-cigarette users, and local small business owners for a panel discussion on the harmful impact of a new tax hike on a growing industry.
Americans for Tax Reform and members of the vapor consumer and industry advocacy community will discuss the tax hike over drinks at Bridget Foy's in Philadelphia at 3PM on Sunday, before the Eagles game.
Speakers will include -
- Amit Fridman, Owner of Sababa Vapes
- Cynthia Cabrera, Executive Director of the Smoke Free Alternatives Trade Association
- Paul Blair, State Affairs Manager at Americans for Tax Reform
- Gregory Conley, President of the American Vaping Association
- Joe Barnett, Board Member of The Vaping Militia
- Alex Clark, Legislative Director of the Consumer Advocates for Smoke-free Alternatives Association
Moderated by Patrick Gleason, Director of State Affairs at Americans for Tax Reform.
Free Drinks, Especially for the Press!
RSVP to Paul Blair at email@example.com.
Clearly Contrasting Choices in Florida Governor’s Race: Rick Scott and Charlie Crist
On Tuesday, November 4th, Florida will host what looks like a nail-biter of a gubernatorial election. Republican Governor Rick Scott is running for reelection against Democrat Charlie Crist. Nearly every available poll has this race tied and the results of the race may have a huge impact on Sunshine State taxpayers.
The records of the two candidates could not provide a more clear choice when it comes to taxes, unemployment, job growth, and the overall economy.
When Charlie Crist took office as governor in 2006, unemployment was at 3.5%, he had made a written commitment to oppose any and all efforts to raise taxes, and he was a Republican. When he left office, Florida had lost more than 830,000 jobs, unemployment had risen to 11.1%, he had signed more than $2 billion in higher taxes into law, he had embraced President Obama's Stimulus package, and he was no longer a Republican.
When Rick Scott took office as governor in 2010, he inherited this mess.
He governed as he promised too, however, cutting taxes, reining in spending, and bringing Florida back from the brink of disaster. As a result, more than 600,000 jobs have been created and unemployment has fallen to 6.1%, the lowest it has been since June of 2008. Florida also had a $1.2 billion surplus this year and Scott has signed over $2 billion in tax cuts into law. This includes 24 individual tax and fees cuts up through 2014 and $400 million in cuts this year.
Both Rick Scott and Charlie Crist signed the Taxpayer Protection Pledge to Florida voters when they ran for governor in 2005 and 2009 respectively. Crist, however, broke his personal written commitment, by signing more than $2 billion in higher taxes and fees into law.
When he couldn’t convince voters to nominate him as a Republican during the 2010 Senate primary, Crist solidified his evolution as Democrat by switching parties. If elected Governor this November, Crist has not ruled out raising taxes again. When asked, Crist said he would raise taxes, “if necessary.” Translation: “I will raise taxes as soon as I can, again.”
Governor Rick Scott, on the other hand, promises to continue his legacy of letting taxpayers keep more of their hard-earned money. If re-elected Scott has promised to cut taxes by another $1 billion by curbing property tax growth, eliminating the business income tax, and reducing communication services sales taxes.
The choices are clear. Rick Scott has a record of creating jobs, reforming government, and cutting taxes. Charlie Crist is an Obama Democrat who doesn’t understand that the Great Recovery in Florida wasn't a coincidence. Crist will raise taxes and can’t be trusted to manage what will soon become the third most-populous state in the country.
ATR and AVA Oppose New E-Cigarette and Vapor Tax in Philadelphia
Today, Americans for Tax Reform President Grover Norquist and American Vaping Association President Gregory Conley sent a letter to the Philadelphia City Council in opposition to a proposal to raise taxes on e-cigarettes and vapor products. The bill, proposed by Councilwoman Blondell Reynolds Brown, would enact a new $2 tax on e-cigarettes and up to a $5 per purchase tax on e-liquids for vapor devices.
The letter reads as follows:
Dear Council Members,
We write today in opposition to all efforts to impose a new tax on e-cigarettes and vapor products in Philadelphia. These efforts come on the heels of a new $2-per-pack cigarette tax that went into effect just over two weeks ago.
A proposed bill by Councilwoman Blondell Reynolds Brown would enact a new $2 tax on e- cigarettes and up to a $5 per purchase tax on e-liquids for vapor devices. Hundreds of thousands of dollars in higher taxes will financially cripple new small businesses in Philadelphia. The small but growing segment of vapor specialty stores rely on the sale of these products as their sole source of revenue. To make the products sold in these stores uncompetitive will drive sales onto the Internet and outside of city limits.
That’s precisely why higher taxes don’t necessarily generate more revenue for the intended cause. Increasing public education's reliance on a volatile revenue source means that once businesses have been chased out of the city and sales go online, the city will be clamoring for even more revenue. This proposal is simply a placeholder for further tax hikes. This is particularly troubling in times of tepid economic growth and in light of the 20 new or higher taxes that have been imposed by Congress in the last few years.
Currently 44,000 students are on waiting lists for better performing charter schools. The problem lies not in lack of tax revenue for schools, but with the education system itself. Higher taxes will not rectify the achievement gap of Philadelphia students compared to those across the country and globe. Since the 2002-2003 school year, revenue for the school district has increased by over $1 billion to $2.97 billion. Meanwhile, there has been no improvement in testing scores since 2009, and a staggering 80 percent of students are not proficient in both math and reading.
The proposal to tax e-cigarettes would represent a massive step backwards for a city with the highest adult smoking rate among the U.S.’s ten major cities according to the CDC. A number of studies have shown that electronic cigarettes stand to improve health and prevent disease. This includes groundbreaking research by Dr. Igor Burstyn of the Drexel University School of Public Health on the chemistry of e-cigarette liquid and vapor.
By choosing to “vape” e-cigs instead of smoking traditional tobacco, consumers get their nicotine fix without the combustion and smoke, which are responsible for almost all of the negative health effects of tobacco cigarettes. Studies indicate that more and more smokers are abandoning the thousands of chemicals in traditional cigarettes in favor of smoke-free and tobacco-free e-cigarettes. Indeed, a recent study out of the United Kingdom that tracked nearly 6,000 smokers looking to quit found that the largest share of successful respondents had done so using e-cigarettes (20 percent), beating those who quit without help (15 percent) and those who used nicotine-replacement therapy such as gum or a patch (10 percent).
For decades, lawmakers have tried to mitigate smoking and the harm it causes through excise taxes and heavy regulation. However, 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. The imposition of new taxes on these products perpetuates an issue lawmakers have spent so much time trying to eliminate, as studies show that almost all e-cigarette use is by smokers looking to significantly cut back or transition away entirely from their dependence on combustible cigarettes.
This e-cigarette tax hike is a shameless cash grab and should be rejected in favor of real reform.
Americans for Tax Reform (ATR) is a non-partisan coalition of taxpayers and taxpayer groups who oppose all tax increases.
The American Vaping Association (AVA) is a nonprofit organization that advocates for the rapidly growing vaping and electronic cigarette industry. The AVA's membership is comprised of small- and medium-sized vapor businesses and has no ties to tobacco companies. The AVA is dedicated to educating the public and government officials about the growing evidence that e-cigarettes – battery-powered devices that heat a liquid nicotine solution and create an inhalable vapor – are harm-reduction products that effectively help smokers quit.
ATR Endorses Proposition 487, the Phoenix Pension Reform Act
Like many cities throughout the United States, Phoenix, Arizona has a broken pension system. Skyrocketing costs have driven the city to the brink of disaster. Fortunately, Proposition 487, also known as the Phoenix Pension Reform Act, is on the ballot this year and gives voters a say in the type of publicly-funded pension plans they pay for.
A number of factors have contributed to the immediate need for pension reform in Phoenix. “Pension spiking,” where employees inflate compensation immediately before retiring increases pension payouts upon retirement, will cost the city over $190 million if left unchecked. This occurs when a city employee close to retirement converts benefits like unused sick time or saved vacation pay to boost benefits.
A select group of retirees have been receiving six-figure pension payouts with this scheme, compliments of Phoenix taxpayers. One recent City manager received an annual pension of $246,813 and upon retiring received $270,174 in sick/vacation days payouts. Another city employee, an executive assistant to the fire chief, received a lump-sum payout of more than $900,000 at age 54. That was on top of his $149,420 annual pension for life.
The Arizona Republic estimates that pension spiking costs city taxpayers $12 million per year. Prop. 487 would prohibit this outrageous practice.
The city's current defined benefit pension system is underfunded by $1.5 billion dollars and annual pension costs have increased by over 40% since 2011 to $253 million. Prop. 487 would replace the defined benefit pension with a 401(k)-type plan for city employees. It would exempt police and firefighters.
The Arizona Republic Editorial Board had this to say: “These dramatic changes will give Phoenix control over skyrocketing pension costs that threaten to strangle the city's ability to provide the services Phoenix residents have come to expect.”
They ultimately endorsed the proposal. “Prop. 487 promises to stanch the financial bleeding that is costing Phoenix taxpayers and seriously threatening city services.The Arizona Republic recommends a 'yes' vote.”
Americans for Tax Reform agrees with the Arizona Republic and endorses Phoenix's Proposition 487.
If you live in Arizona and haven’t already voted, click here to find out where to vote in person.
ATR Opposes Gas Tax Increase in New Jersey
Americans for Tax Reform president Grover Norquist sent a letter to the New Jersey legislature and Governor Chris Christie this week urging them to reject efforts to increase the gas tax. After years of reckless overspending, the Transportation Trust Fund has racked up $18 billion of debt and is close to running dry.
A second hearing will be held in New Brunswick on October 14 where a number of special interests are expected to reiterate their calls for a gas tax increase. The state should reject these calls because a gas tax hike would harm families struggling to make ends meet, families who have had to grapple with 20 new or higher federal taxes over the past several years. A vote for any transportation funding package that raises the gas tax without dollar for dollar tax cuts elsewhere would be a violation of the Taxpayer Protection Pledge.
New Jersey doesn’t have a revenue problem; it has a spending problem.
A large reason the Trust Fund is out of money is because capital costs for transportation projects are astronomically high. According to the Reason Foundation’s 21st Annual Report on the Performance of State Highway Systems, New Jersey spends $2.02 million per mile of highway, more than any other state in the nation. New York spends less than a quarter of what New Jersey does at $462,000 per mile on its transportation system. Project Labor Agreements and prevailing wage laws have greatly contributed to exorbitant costs and a bankrupt Transportation Trust Fund.
Transportation packages that do not contain solutions for reining in spending and addressing these cost-drivers will do little to solve New Jersey’s long-term problems. The legislature should commission an independent audit aimed at identifying waste and mismanagement of Trust Fund dollars. Otherwise, tax dollars actually spent on transportation projects will continue to benefit those who build roads far more than those who actually use them.
New Jersey is already among the highest taxed states in the nation. Residents pay the highest property taxes and some of the highest income and corporate taxes as well. The state comes in second to last for the Tax Foundation’s Annual State Business Tax Climate Index. Discussions revolving around raising the gas tax make it seem as if there is a race to the top on every tax that exists in the state.
Legislators should work to cut costs, rein in spending, and reject all efforts to increase the overall tax burden.
Liberal Trial Lawyer Mike Woelfel Promises to Raise Taxes in Bid for West Virginia State Senate
In his bid to become the next state Senator from West Virginia’s 5th district, trial lawyer Mike Woelfel has promised voters that if elected, he will raise taxes.
“I’m the first politician that says I’ll raise your taxes.” -Mike Woelfel
Hold your wallets. Promising to raise taxes is far from a forward thinking plan for pulling West Virginia out of decades of fiscal decline. West Virginia University’s Bureau of Business and Economic Research estimates that by 2030, the state will lose another 20,000 residents. Raising taxes will expedite this process.
Liberal Democrat Mike Woelfel clearly doesn’t understand what’s going on in West Virginia. Hundreds of thousands of people have moved from high tax states to low-tax ones. For decades, the Democrat-run legislature has sat idly by as billions of dollars in investment and opportunities have leapt over the Mountain State. Even for a proud Progressive, this should be troubling.
The WVU study noted, “Positive changes to the state’s business or policy environment…could attract migration into the state.” Higher taxes aren’t the answer.
The Republican in the race for the 5th district is a businesswoman who understands this. Vicki Dunn-Marshall has created thousands of jobs and understands that too many people have left the state because of the kinds of policies that Mike Woelfel supports. Not only does Vicki Dunn-Marshall oppose higher taxes, she put it in writing to voters by signing the Taxpayer Protection Pledge.
By signing the Pledge, Vicki Dunn-Marshall has demonstrated that she is the only candidate in the 5th district that stands with taxpayers and against special spending interests in Charleston. Voters should remember that when they head to the ballot box on Election Day.
Thanks to Mark Warner, Another 250,000 Virginians Lose the Health Care They Liked
If you thought you escaped Obamacare’s hammer on your health care plan, you might be wrong in Virginia. Another quarter of a million residents will have their private health insurance plans cancelled this fall, forcing them to find new plans, which may be more expensive. This is on top of the already 850,000 Virginians who received cancellation notices over the past year.
Lawmakers asked the Executive Director of the Virginia Association of Health Plans if these new plans would have higher co-pays. His response? “Absolutely.”
The timing couldn’t be worse for Democrat Senator Mark Warner, who is running for re-election this year against Republican Ed Gillespie. Not only did Mark Warner vote for Obamacare, he echoed the 2013 “Lie of the Year.”
“Let me be clear. I’m not going to support a health care reform plan that’s gonna take away health care that you’ve got right now OR a health care plan that you like.”
Unfortunately, because of Mark Warner’s vote for Obamacare, if you like your health care plan, you may be one of the hundreds of thousands of Virginians who can’t keep it.
These plans have been cancelled because private health insurers are not allowed to offer plans that don’t meet the requirements of the federal health care law. Some of those requirements for every person’s health insurance plan now include:
- Maternity and newborn care, regardless of age and gender
- Diet and obesity screening and counseling
- Contraception and vasectomies
A spokesman for Ed Gillespie responded, “Because Mark Warner worked to pass Obamacare, 250,000 Virginians are losing the health insurance they liked, with thousands getting hit with huge out of pocket cost increases while unable to see the doctors they trust." He’s absolutely right.
Imagine if 15,000 of those people (or their family members) were planning on voting for Mark Warner this fall, just as they receive a cancellation notice in the mail notifying them that Mark Warner’s vote for Obamacare cost them the insurance they like. This could be a game-changer in the Virginia US Senate race.