In the ongoing saga around the appropriate taxation of electronic cigarettes and vapor products in Indiana, the Senate Appropriations Committee voted to pass a 20 percent retail tax on products sold in the state. The recent Senate amendment to House Bill 1444 took a different approach than that of the House-passed 4 cents per mL tax on e-liquids, putting both chambers at odds with each other on what to tax and how to tax it. Both bills are misguided and should be examined further in the coming months before implementation is even considered.
The Senate-passed 20 percent retail tax would be on top of the current 7 percent state sales tax, making the total tax on vapor products, including devices, 27 percent. This onerous tax would send the wrong message to adults who smoke, by raising costs on less harmful alternatives to cigarettes. It would do so while making Indiana a standout state in its structure of a vapor product tax, making it more progressive and extreme than California or New York, which do not tax devices. Implementing the most broad, extreme, and regressive tax in the nation on this innovative industry should not be the objective of Indiana lawmakers.
Vaping is a proven-effective alternative to both cigarettes and traditional cessation methods. A study conducted by Public Health England concluded that vapor products are at least 95% less harmful than combustible cigarettes. Moreover, the New England Journal of Medicine determined that the use of e-cigarettes are nearly two times more effective than quit methods such as the use of nicotine gum and patches. Taxing effective quit methods flies in the face of both public health and ideal tax policy.
The Senate amendment to impose a massive new retail tax on e-cigarettes did not go unchallenged. State Senator Phil Boots, R-Crawfordsville, stood firmly against the tax, leaving him the sole opposition vote in committee. ATR applauds his efforts and encourages more of his colleagues to discuss the matter with him moving forward.
At present, the bill is being considered by a joint conference committee, to work out the differences between the House and Senate tax structures and rates. ATR encourages the legislature to reject both approaches and examine the issue in the future, particularly the appropriate use of the sales tax and the sales tax alone for the taxation of the industry and its consumers moving forward.
ATR’s letter to the state Senate can be read here.