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1 Scott Drenkard, Vapor Products and Tax Policy 1 (2016)

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TAXS
FOUNDATION

FISCAL

FACT
No. 505
Mar. 2016


Vapor Products and Tax Policy



By Scott Drenkard*
     Economist, Director
     of State Projects


Key Findings

    As of January 1, 2016, four states, the District of Columbia, and three local
    jurisdictions have enacted taxes on vapor products (electronic cigarettes), but their
    methods and levels of taxation vary dramatically.

 * In 2015, at least an additional 23 states considered excise taxes on vapor products.

 * Vapor products are generally found to have a much lower risk profile than
    traditional incinerated cigarettes.

 * Public Health England, housed in the British Department of Health, issued findings
    that vapor products are 95 percent less harmful than cigarettes and can serve as
    an effective tobacco-cessation method.

 * Vapor products likely have much lower externalities than traditional cigarettes, and
    it follows that the excise taxes on the products should be lower or nonexistent.

 * Punitive taxes on vapor products could inadvertently close out options for
    cigarette users looking to quit.


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 local
levels. We are a 501(c)(3) non profit
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©2016 Tax Foundation
Distributed under
Creative Commons CC BY NC 4.0
Editor, Melodie Bowler
Designer, Dan Carvajal
Tax Foundation
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.  The author would like to thank Ben Bristor for his assistance on this report.


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