The rationale behind taxing tobacco is quite simple and beneficial: as you smoke, you get sick and the state has to pay a lot more for your healthcare. This works great with the classic purpose for excise tax, but they are only legitimate if the money is used to pay for externalities.
But, the thing is that tobacco taxes in particular have never really been about externalities. If they were, every cent of this massive income would go to smoking-related healthcare. Instead, many states give some tobacco tax revenue for other purposes, like education for instance. As many lawmakers agree, cigarette taxes are not at all about externalities but about collecting as much money as possible.
Electronic cigarettes, besides being enjoyable, they produce a lot of revenue. The US cigarette market is estimated at $2 billion and continues to expand with year that passes by. There are a lot of money to be made from an ecig tax and the legislators want a nice big share of the profit.
After so many months of continuous debate over the budget in New Jersey, the latest concession does not actually tax e-cigarettes as had been pushed for by a number of Jersey politicians, including renowned Governor Chris Christie. This is a major win for e-cigarettes as the idea to tax them in New Jersey was rather strong for a time.
New Jersey lawmakers sent Gov. Chris Christie a $34.1 billion budget that would boost taxes on the state's wealthiest residents and make corporations to for a record $2.25 billion into the public-worker pension fund.
‘This is a responsible plan that meets our legally mandated fiscal obligations and provides much-needed relief for those struggling the most by asking just a little more from the most fortunate among us,’ said Democratic Assembly Speaker Vincent Prieto, after the tax package passed.
Strikingly, the budget agreement eliminated a proposed tax on e-cigarettes, which the administration supposed would generate $35 million in revenue annually. Manufacturers would have faced a 75% tax on ecigs and related products sold to retailers, and a flat $2.70 tax to consumers. The bill didn't get a vote.
Advocates of the e-cigarette tax argued that it was created to protect non-smokers from nicotine and reduce the usage of these devices by smokers. But in the end it appeared clear the tax was drawn up mostly to take extra cash out of consumers’ pockets, in order to make up for a state-wide deficit.
Scientific research is constantly revealing that e-cigarettes are an extremely viable cessation alternative for smokers. At worst, they outperform patches by mirroring patch-quit rate and getting those that don’t quit to cut down on the number of combustibles. At best, they appear capable of completely replacing analog cigarettes for around 25% of smokers. Taxing e-cigs would only make it more likely individuals might stick to smoking — which is known to be far more harmful.