If you tax vaping, people smoke more cigarettes

Unsurprisingly, a new NBER working paper has found that e-cigarette taxes result in more people smoking cigarettes. The authors examined vaping taxes enacted in eight U.S. states and two large counties, concluding that e-cigarettes and traditional cigarettes are substitutes. 

This result is hardly surprising— in the UK, 94% of our 3.6 million vapers are former or current smokers. More than half have quit smoking completely. A large body of evidence shows that vaping is at least 95% safer than smoking. Randomised control trials have demonstrated that they are a highly effective quit method. The idea that we should make vaping more expensive through a targeted tax hike is absurd.

Despite this, America continues to wallow in its hysterical moral panic about e-cigarettes. A House Bill championed by Democrats is proposing a tax of $50.33 per 1,810 milligrams of nicotine (raising the price of a Juul pod by $1.72), which the NBER paper’s authors estimate would increase traditional cigarette purchases by 29,182 packs per 100,000 adults. This is extremely unlikely to improve public health.

And it’s not just the idea of taxing safer substitutes for cigarettes itself that’s nonsensical. Many states levy e-cigarette taxes on the amount of e-liquid in a particular product rather than on a per-unit basis. Just as cultivation taxes on the weight of cannabis encourage more potent strains, taxing the volume of e-liquid biases the market towards higher nicotine concentrations than would otherwise have been the case. Regulated high nicotine liquids are just as safe and may be useful for heavier smokers who need an extra kick to make the switch, but we shouldn’t distort consumer preferences like this.

Thankfully the majority of the public health establishment in the United Kingdom isn’t likely to go the same way as America, although there are still alarmist voices. The last time we had rumours of an e-cigarette tax, it received the reception it deserved. This NBER working paper is yet another reminder that crackdowns on vaping aren’t just illiberal—they drive people back to traditional cigarettes.