Testimony of Carl V. Phillips, PhD, Consumer Advocates for Smoke-free Alternatives Association (CASAA)
in Opposition to bill H 884
8 April 2014
I am Carl V Phillips, PhD, Scientific Director of CASAA, The Consumer Advocates for Smoke-free Alternatives Association. I live in xxxx, New Hampshire.
I urge you to not support H 884, which would inappropriately place a disproportionate tax burden on people who have used e-cigarettes to quit smoking and discourage further switching to this low-risk alternative to smoking.
I am a public health scientist and award-winning epidemiologist. I spent most of my career as a professor of public health, and most of that focusing on tobacco harm reduction. I have been doing research on smoke-free alternatives to smoking, including e-cigarettes, for longer than almost any other researcher in the world and have published numerous journal articles and other writings on the topic. I am here on behalf of CASAA, which is a public health NGO and consumer representative, not an industry group. CASAA is a volunteer organization and I am not being compensated for providing this testimony.
Imposing a punitive tax on e-cigarettes is a terrible idea, first and foremost, because it will be harmful to public health. E-cigarettes are approximately 99% less harmful than smoking. While this alone seems like sufficient motivation to switch from smoking, the reality is that many smokers are motivated by purchase price in the short run. That is, a lot of smokers try e-cigarettes just because they are cheaper (even though the products are inherently more expensive, the high taxes on cigarettes make them cheaper to buy). Even smokers who are seriously considering switching for health reasons would be discouraged from doing so if e-cigarettes were considerably more expensive. Come for the savings, stay for the near elimination of health risk.
While there are much-hyped concerns about nonsmokers experimenting with e-cigarettes, almost all e-cigarette use is by smokers who are trying to switch or at least reduce their smoking, or by ex-smokers who are remaining ex-smokers thanks to their use of e-cigarettes. Moreover, paying a few dollars extra for a one-time or occasional purchase is not going to discourage experimenters. However, it will discourage many smokers who expect to pay that premium thousands of times.
It is easy to show, as a matter of economic science, that if improving public health is the goal, then low-risk alternatives to smoking like e-cigarettes should actually be subsidized. As far as I know, I am the only one who has actually run the math on that, which you can find at this Robert Wood Johnson Foundation working paper: http://healthpolicyscholars.org/sites/healthpolicyscholars.org/files/w50_phillips.pdf. Of course, a subsidy for e-cigarettes is not on the table and no one is proposing it as a practical option. The point is that adding a punitive tax is a step in the wrong direction for public health.
Additionally the tax would create a burden for those who are not discouraged and choose to pay it, basically punishing them for quitting smoking. Taxes on cigarettes create a substantial and regressive burden on people, often cutting substantially into their family budgets. Such taxes are regressive both because they consume a much larger portion of a lower-income person’s budget, but also because people who smoke tend to be lower income than average. This extra tax burden imposed on lower income people is justified by its proponents because of the goal of discouraging smoking. But quitting smoking is obviously not a behavior we want to discourage – it is the ostensible goal of the high cigarette taxes. And yet quitting is exactly the behavior that would be both discouraged and punished by an e-cigarette tax.
I say “ostensible goal” because high cigarette taxes are often really motivated by trying to balance state budgets in a political environment where it is hard to raise other taxes. As sales of cigarettes are reduced by e-cigarettes and other social forces, states become desperate to make up the lost tax revenue. It is tempting to look to the substitutes for cigarettes to find the extra revenue. But not only does this fly in the face of the supposed justification for the cigarette taxes, but all the ethical justifications for trying to balance the budget on the backs of lower-income citizens disappear. All that is left is an unfairly regressive tax that harms public health rather than improving it.
Finally, for Vermont, the revenue might not work out as hoped. While a smoker who is tempted to buy a disposable e-cigarette at the gas station might be discouraged by the high taxes, and thus buy his usual cigarettes instead, experienced e-cigarette users tend to buy expensive reusable hardware and inexpensive refill liquid. It is easy to make the short trip to New Hampshire or other states to buy the hardware and months worth of refill liquid, which is easy to keep a large stock of and that, unlike cigarettes, does not rapidly lose freshness. Indeed, I am sure that there are e-cigarette merchants in New Hampshire who would really love to see this pass. For consumers who do not want to make the occasional drive, purchasing over the internet, where sales tax laws are often evaded, is a popular option. A 92% tax may actually be well down the backside of the Laffer Curve, raising the price so much that tax collections are actually reduced compared to just continuing to collect the standard sales tax.
In summary, this tax is regressive, punishes people for quitting smoking, and discourages smoking cessation. It does almost nothing to discourage the rare experimentation by nonsmokers. If the goal is improving public health, a subsidy would be in order, not a tax; the tax will harm public health. If the goal is revenue, this is a particularly inappropriate way to get it, and may profoundly fail to do so.