Taxes on nicotine products: can variable levels help stem the toll of smoking?

By Gil Ross — Aug 12, 2015
Today s New England Journal of Medicine has a Perspective article by three tobacco experts. Their discussion, Differential Taxes for Differential Risks, contains some important policy recommendations, some clearly salutary, and some not so much.

E-vapor ArrayIn today s NEJM, a Perspective article by three experts in tobacco and economics discuss variable approaches to taxing nicotine-delivery products. Entitled Differential Taxes for Differential Risks Toward Reduced Harm from Nicotine-Yielding Products, it is co-authored by Frank J. Chaloupka, Ph.D., David Sweanor, J.D., and Kenneth E. Warner, Ph.D.

Dr. Chaloupka is a professor of economics at the University of Ill. in Chicago. He s an expert in the economic analysis of substance use and abuse. Dr. Ken Warner is Dean of the University of Michigan School of Public Health and is also Director of the University s Tobacco Research Network. Dave Sweanor is a professor of law at the University of Ottawa. They all sharply oppose the prevailing policy on taxing tobacco products: they deride the conventional wisdom in the tobacco-control world which has long been that all products should be taxed similarly. For example, the World Health Organization states that adopting comparable taxes and tax increases on all tobacco products is a best practice for tobacco taxation. They point out that with the panoply of low-risk nicotine products now available, a wiser course of action would be to ratchet up the taxes on the most dangerous nicotine product combustible cigarettes while taxing lower risk products, such as low-nitrosamine smokeless/snus and ENDS (those are e-cigarettes) at a reduced rate.

They say this will help to reduce smoking while keeping low-risk nicotine products accessible to poorer smokers.

I take issue with three points in their essay:

1: To alleviate concerns that low prices on ENDS and lower-risk tobacco products might encourage uptake among young people, taxes on such products could be set high enough to discourage initiation. Since e-cigarettes and other smoking cessation tools are not tobacco products I believe there should be no excise tax on them.

2: Given the FDA's regulatory authority over the manufacture, distribution, and marketing of tobacco products, a differential taxation strategy could be complemented by other policies, such as restrictions on ENDS marketing and strong product standards, to maximize public health benefit. There has not been any demonstrable harm to ENDS users and they provide a way out of smoking for addicted smokers. Plus, who s to decide what marketing is acceptable, and which ads are banned?

3: Lastly and most importantly, they seem to be OK with the FDA s deeming regulations as proposed in April of 2014, which would destroy smaller harm reduction companies and send the survivors into the arms of the Big Tobacco they claim to want to stop: Perhaps most important, as proposed in the FDA's recent deeming rule, the agency's authority over tobacco products could be extended to cover additional products including ENDS, opening up such items to new regulation. Not only is this irrelevant to their central theme, i.e. taxing based upon relative risk, but it is the exact wrong way to help smokers quit.

I was immensely disappointed to read that in a generally productive article, because it will surely propel the cause of not increasing taxes uniformly on all tobacco products regardless of their lethal potential.