A new Senate bill aiming to bring tax parity to the sale of tobacco products also promises to raise taxes on the sale of vapor products. The bill was introduced to the 115th Congress this past September by Senator Dick Durbin (D-Ill.).
The Senate bill, entitled the Tobacco Tax Equity Act of 2017 seeks to close tax loopholes long exploited by the tobacco industry. But in their rush to tax Big Tobacco, e-cigarette advocates say that they have unnecessarily felt the squeeze of government regulation.
The bill seeks to tax all tobacco products equally. This concept – tax parity – means that taxes for buying traditional, smoked tobacco products would be the same for smokeless tobacco products (like chewing tobacco), roll-your-own (RYO) loose leaf tobacco and ultimately, e-cigarettes.
The government says the bill would not only recoup lost revenue from tobacco sales but also prevent future generations of Americans from starting smoking. The bill was initially introduced to prevent tobacco companies from selling customers tobacco products wrongly classified as pipe tobacco or cigars.
These products are taxed at a lower rate than traditional tobacco products like cigarettes and rolling tobacco. While the bill was primarily crafted to target the openings in the tax code exploited by Big Tobacco, e-cigarette industry lobbyists worry that their industry and their consumers would be unfairly caught up in the government’s crackdown.
However, the drafters of the bill, among them cosponsors Sherrod Brown (D-OH), and Al Franken (D-MN) have not tried to cover up their explicit targeting of e-cigarettes with their bill. The bill’s chief sponsor, Senator Dick Durbin, specifically mentions “e-cigarettes” as another way tobacco companies “damage our nation’s health” in his press release announcing the introduction of the bill.
The e-cigarette industry is largely unregulated, despite annual revenues reaching $1.7 billion. E-cigarettes have largely escaped the squeeze of government regulation since they exist in a regulatory grey zone – they are not traditional tobacco products, but they do contain nicotine.
The Food and Drug Administration (FDA) finally took steps, despite much opposition, in April of 2014 to get e-cigarettes classified as “tobacco products.” With this classification by the FDA came the opportunity for the Congress to regulate the industry through legislation like the Tobacco Tax Equity Act.
Firstly, the e-cigarette industry disputes this classification as a “tobacco product.” Furthermore, since proponents of e-cigarettes often promote them as a safer alternative to smoking regular tobacco products, they also disagree with the government’s claim that e-cigarettes pose the same danger to public health as cigarettes.
The reasons behind the resistance of the vapor products industry to this legislation are two-fold. They dispute the government’s classification of vapor products as “tobacco products” which then leaves them open to being taxed as such. The Senate vapor tax bill rubs salt into the wound of vapers who have long rejected drawing an equivalency between e-cigarettes and regular cigarettes.
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