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1 Ulrik Boesen, Taxing Nicotine Products: A Primer 1 (2020)

handle is hein.taxfoundation/txnicp0001 and id is 1 raw text is: Taxing Nicotine Products: A Primer Ulrik Boesen Senior Policy Analyst, Excise Taxes Key Findings: The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and global levels. We are a 501(c)(3) nonprofit organization. @2020 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org * The American nicotine market is developing faster than ever due to introduction of non-combustible recreational nicotine products. These new products, along with a greater consciousness about the dangers of smoking, have prompted millions to give up smoking. This contributed to federal and state excise tax collections on tobacco products declining since 2010. * Excise taxes are commonly employed to discourage certain behaviors. They do this by decreasing both supply and demand for a product via price increases. They are also imposed to price in externalities associated with consumption of specific goods. * Current federal tax proposals seek to tax electronic nicotine delivery systems (vapor products) at the same rate as traditional cigarettes. H.R. 4742 was approved by the House Ways and Means Committee in October 2019 and suggests taxing based on nicotine content. * Twenty-one states currently tax nicotine products, but they do so in different ways. States tax based either purely on price (ad valorem), purely on volume (specific), or with a bifurcated design at different rates for open and closed tank systems. More states are expected to introduce taxes on vapor products in 2020. * From a pure public health standpoint, the justification for taxing recreational nicotine products can seem weak. Vapor products, heated tobacco, snus, and nicotine pouches are all thought to be considerably less harmful than cigarettes, which means substitution from cigarettes to any of these products should be encouraged. While youth uptake is a very real concern, tax policy is not the appropriate way to address it. FISCAL FACT No. 688 Jan. 2020

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