Alabama lawmakers are currently considering a tax proposal from Governor Bentley that could shutter hundreds of small businesses and kill up to 2,000 jobs. The proposal would institute a new 25-cent per mL tax on e-cigarette liquid, making Alabama the 26th state this year to propose higher taxes on e-cigarette users.
E-cigarettes have grown in popularity as a way to quit smoking tobacco. E-cigarettes do not contain the carcinogenic chemicals that tobacco products do, and they allow users to regulate nicotine content so they can wean themselves off of the product. As one e-cigarette business owner put it: “We’re not smokers, we are ex-smokers who found something we could use to get away from that nasty habit.”
But according to the Breathe Easier Alliance of Alabama, a group representing e-cigarette users and business owners, the entire industry in Alabama could evaporate overnight if this tax is passed. The group argues that the tax “will force the vast majority of these businesses to close,” taking with them nearly 2,000 jobs for Alabamans.
None of Alabama’s neighbors impose a special e-cigarette excise tax, so Alabama businesses would be at an immense disadvantage. In fact, many businesses have already expressed a desire to take their business – and jobs – out of state. Lee Black, the owner of a 5 shops, put it bluntly: “If they do this tax… we’ll have to leave the state”.
The tax is an attempt by Governor Bentley to raise revenue during the state’s special budget session. The state faces a $200 million shortfall and the proposed e-cigarette tax – bundled with a tobacco tax increase – aims to raise $70 million. It is doubtful that this tax would generate anywhere near this revenue projection for a number of reasons. The proposed 25 cents per mL tax would make a 30 mL bottle of e-liquid $7.50 more expensive than at present time. Consumers would likely purchase these products from other states and online where they do not have to pay the tax. And, by forcing businesses and consumers out of state, the Alabama would lose out on potential and currently collected sales tax revenue.
Governor Bentley has been insistent on tax hikes to fill the budget hole, but there is a better alternative being discussed in the legislature: combined budget reform. Alabama is currently one of only three states that have separate Education and General Fund budgets. Combining these would free up funds and allow for more flexibility in appropriations. Legislators reconvene in Montgomery today, and will have nine days to reach their budget decision.