The National Bureau of Economic Research (NBER) released a preliminary scientific report, referred to as a working paper, examining the effects of Minnesota’s e-cigarette tax.  

Implemented in 2010, Minnesota’s e-cigarette tax was the first in the nation and levied a 35% tax rate on the wholesale price of e-cigarettes and vaping products. The tax was raised in 2013 by sixty percentage points for a total tax rate of 95% of the wholesale price. This tax had a “substantial impact on prices”.  

Researchers at NBER utilized data from the Current Population Survey Tobacco Use Supplements from 1992 to 2015 to assess how the tax hike impacted smoking cessation among adult cigarette smokers. Their study indicates “the e-cigarette tax increased adult smoking and reduced smoking cessation in Minnesota”. Read more about the key finding of the NBER paper below. 

Key Findings:

  • Minnesota’s e-cigarette tax prevented “about 32,400 additional adult smokers” from quitting cigarettes who “would have quit smoking in Minnesota in the absence of the tax.” 

  • If Minnesota’s 95% wholesale tax rate was imposed on a national level “1.8 million smokers would be deterred from quitting in a ten-year period.” 

  • Researchers found “consistent and robust evidence that the e-cig tax in MN increased adult smoking relative to what it would have been in the absence of this tax.” 

There have been calls from some lawmakers and activists to raise the e-cigarette tax nationwide to the same rate as traditional combustible cigarettes. This NBER paper states that should that occur, “the price of e-cigs by approximately 62 percent, increase smoking participation by 8.1 percent, and deter approximately 2.75 million smokers from quitting.” 

To put those statistics in a different perspective, national trends indicate that by 2030, 11 million smokers will quit cigarette use. If e-cigarettes and traditional cigarettes are taxed at the same rate, the number of smokers who quit by 2030 would be reduced by 25%. 

A supplemental NBER study that was revised earlier this month reinforced the findings of this working paper. The new economic model discovered that for every 10% increase in the e-cigarette tax rate, e-cigarette sales should be expected to drop by 26% while combustible cigarette sales will increase by 11%. 

Before analyzing any data, NBER researchers stated, “If higher e-cig taxes dissuade adult smokers from shifting to vapor products and from quitting smoking in the process, … this would provide justification for taxing e-cigs less than traditional tobacco products, if at all.”  

This study illustrates that e-cigarette taxes increase smoking rates and decrease smoking cessation among adults. Small increases in projected tax revenue should never come at the expense of human lives.  

Minnesota’s e-cigarette tax has had disastrous consequences. Lawmakers across the country must avoid making similar mistakes that will cost lives.