There's an interesting phenomenon playing out in both New Jersey and Ohio: Two of the country's most prominent conservative Republican governors have proposed new taxes of a sort that haven't appealed even to traditionally liberal, tax-hungry state legislatures in states like Massachusetts and Washington.
New Jersey governor Chris Christie and Ohio governor John Kasich have asked their legislatures to enact an excise tax, or sin tax, on the sale of electronic cigarettes (e-cigarettes). The stated goal of both governors is to equalize the tax applied to e-cigarettes with that applied to combustible-tobacco cigarettes.
While the product's common name may be misleading, e-cigarettes are not cigarettes. They are smoke-free, tobacco-free, battery-operated devices that allow smokers to get nicotine without inhaling burning-tobacco smoke. Currently, these products are subject to sales tax, like any other consumer product, in Ohio, New Jersey, and 46 other states.
Governor Christie announced the plan in the spring but still has not actually specified the rate at which he wants to tax e-cigarette products. That hasn't stopped his Treasury Department from somehow estimating that $35 million in revenue would result from this undefined tax hike. Indeed, his administration has refused to admit that this is a tax hike, instead describing the tax as part of a move to "level the playing field" between e-cigarettes and combustible cigarettes, the latter of which are taxed at the state level at $2.70 a pack. Putting aside the absurd notion that cigarette markets need to be protected from competition, Governor Christie's adamant denial of the fact that he is seeking to increase taxes should worry any conservative who wants to see him in the White House.
His proposal has yet to be endorsed by a single Republican in the New Jersey legislature. Indeed, his support on this measure has come almost solely from two liberal Democratic state senators. They were so inspired by his proposal that they introduced their own bill that would tax e-cigarettes at 75 percent of wholesale price.
Governor Kasich's Ohio plan would, over two years, raise the state's tax on a pack of actual cigarettes from $1.25 to $1.85, tax e-cigarettes at 49 percent of wholesale price, and raise the state's tax on smokeless tobacco to the same rate. The Kasichadministration is claiming that the estimated $850 million in revenue created by these tax increases over a three-year period would allow Ohio to cut income taxes along all brackets.
E-cigarettes are a prime example of the free-market insight that the private sector is better than government at addressing societal problems. E-cigarettes may do more good for public health by getting people to quit smoking than any tax, warning label, or self-righteous taxpayer-funded ad campaign has ever done. So we are bewildered as to why Governors Christie and Kasich would proactively seek to undermine this private-sector approach to smoking by, of all things, taxing it.
Our best bet is that it has nothing to do with public health per se, and everything to do with another kind of addiction. These proposals underscore the fact that state governments are more addicted to cigarettes than most smokers are: At least some smokers can quit — but states don't give up tobacco taxes. Now that smokers are quitting tobacco and using the dramatically less risky alternatives, those responsible for state budgets want to keep their hands in our pockets by taxing tobacco-free e-cigarettes. The governors' approach to the real public-health heroes who have quit smoking with e-cigarettes? Pay up.
We think sin taxes are a bad idea. But if they do exist, even for e-cigarettes, they should at least have a structure that more accurately reflects the risks of different products.
First, for decades, high sin taxes on cigarettes have been justified by pointing to the costs incurred by taxpayers in treating smoking-related illness. These costs have been overstated, but e-cigarettes, which help people quit, will reduce health-care costs, so no additional tax on them is justified.
Second, advocates for cigarette sin taxes argue that taxes help "nudge" people to behave differently. Making the cost of e-cigarettes equal to or higher than that of real cigarettes would nudge people in the wrong public-health direction — away from using the dramatically less harmful alternative to cigarettes.
Neither Governor Christie nor Governor Kasich has publicly professed a belief that e-cigarettes are as dangerous as traditional cigarettes. The chief regulator at the Food and Drug Administration's Center for Tobacco Products, Mitch Zeller, dispelled that notion when testifying before a U.S. Senate committee in May. "If we look at a subset of smokers who are otherwise unable or unwilling to quit," and "we could get all of those people to completely switch all of their cigarettes for one of these noncombustible products, that would be good for public health," Zeller said. He reiterated that belief earlier this month, telling attendees at a public-health conference, "Let's not lose sight of the bigger picture here — tobacco use remains the leading cause of preventable death and disease principally because of the ongoing use of products that burn tobacco."
Emerging evidence suggests that e-cigarettes are helping many smokers quit. Just last month, the journal Addiction published the results of the first cross-sectional survey that sought to measure the effectiveness of e-cigarettes among those trying to quit smoking. The study covered a population of nearly 6,000 smokers in the United Kingdom who had made an attempt to quit in the prior year. It found that smokers who reported trying to quit with e-cigarettes were twice as likely to report cessation than those smokers who used nicotine-replacement-therapy (NRT) products such as the patch or gum (20 percent vs. 10.1 percent). E-cigarettes also beat unassisted "cold turkey" quitting, with 15.4 percent of the latter group of quitters succeeding.
Republican governors, especially those who may have presidential aspirations, could learn a thing or two from Vermont's Democratic governor, Peter Shumlin, who opposed Christie- and Kasich-style taxes in his own state. "My own view on e-cigarettes is that we should be cautious about taxing a product that we think might be gettin' some folks off of tobacco," declared Shumlin at a press conference. We couldn't agree more.
— Jeff Stier is a senior fellow at the National Center for Public Policy Research in Washington, D.C. Gregory Conley is a research fellow at the Chicago-based Heartland Institute.