As many predicted, New Hampshire Governor Chris Sununu has vetoed the 2020-2021 state budget over the inclusion of a business franchise tax hike. As the parties go back to the negotiating table, state legislators should consider removing another harmful tax hike, namely, the inclusion of a sin tax on electronic cigarettes and vapor products. The proposed measure included in the denied budget would tax these products using a bifurcated model, ignoring the net public health benefits that vapor products provide and the economic benefits that low-tax policies have previously brought to the state.
The proposed tax would apply a 30 cent per mL rate on closed-system products, like those sold in most convenience stores, and a wholesale tax of 8% on open-system products, refillable products sold primarily in specialty vape shops.
A pair of studies completed by Public Health England (PHE) and the Royal College of Physicians (RCP), both based in the U.K., estimated that electronic cigarettes are around 95% less harmful than traditional combustible cigarettes. Additionally, a study published in the New England Journal of Medicine demonstrated that e-cigarettes are are twice as effective in aiding smoking cessation than nicotine replacement therapy (NRT) products such as patches. Even former FDA Commissioner Scott Gottlieb, who launched a regulatory crusade against vaping towards the end of his term, admitted in a statement made through the FDA, that “Novel products with different characteristics or routes of nicotine delivery have the potential to offer additional opportunities for health-concerned smokers interested in quitting.”.
Instead of punishing individuals for switching to a less harmful product or trying to quit smoking, New Hampshire lawmakers should make every effort to preserve the current financial and health incentives for adults to use these products over their traditional combustible counterparts.
Pro-growth policies such as the absence of a traditional income tax and a lack of a broad-based sales tax, have been a boon to the state of New Hampshire. As a result of responsible tax policy, New Hampshire enjoys a robust economy which ranks 7th in the US in per capita personal income, tied for 3rd in unemployment, and has the nation’s lowest poverty rate. Unfortunately, the drafted budget ignores these results and seeks to increase taxes on both consumers and businesses. The proposed vapor tax is just a piece of this, but it demonstrates a significant departure from what has made New Hampshire successful. Applying a vapor tax at such a high rate threatens local businesses which stock these products in addition to a number of New Hampshire-based companies which produce e-liquid. Adopting a tax on electronic cigarettes would make New Hampshire the fourth state in New England to do so, joining Vermont, Connecticut, and Maine. New Hampshire has long been the fiscally-responsible outlier in a region full of tax-happy states, not the progressive trendsetter. This history only makes the consideration and approval of a vapor tax more troubling.
Governor Sununu has incorrectly claimed, “It’s not a new tax, it’s a new product” and called the tax a “commonsense update.” While ATR applauds the governor for his steadfast opposition to the business franchise tax hike, his approach to this issue is misguided. Not only have these products been on the market in the United States for over a decade, but also changing the state law to tax a new product is in fact a new tax.
Now that the opportunity has presented itself, we urge the state legislature to reconsider including a tax hike on products that adults who smoke are using to quit.