Inverted logic

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In 2006, Arizona voters passed Proposition 203, establishing First Things First (FTF), an agency dedicated to funding early childhood development programs that provide child care and preschool services to prepare children for kindergarten.

While the goals of FTF’s initiatives may be laudable, there is one problem: the source of funding. 

The agency’s annual revenues dropped by $76 million, representing a 47% total decrease. How can there be such a sharp decline in funding? Most of the money comes from cigarette taxes.

Since implementation, the smoking rate has plummeted in Arizona. In 2005, 20% of Arizonans smoked; that number was 10% by 2023, a public health victory, but it has been a drain on FTF. 

However, state lawmakers think they have a solution: a new tax on vaping. Due to the current popularity and addictive nature of e-cigarettes, this policy should be a slam dunk.

But lawmakers are trading one unreliable source of funding for another, punishing adults trying to quit smoking and pushing vapers to the black market.

There is a fundamental tension in tethering tax revenue to nicotine products. After all, sin taxes are designed to discourage consumption. Nicotine is highly addictive, but this doesn’t eliminate price sensitivity.

Research has shown there is a relationship between cost increases and reduced smoking rates. Estimates suggest that a 10% price increase decreases cigarette consumption by 4%. 

Researchers found that a $1 increase on a pack made smokers 20% more likely to quit. This explains why most tobacco tax increases fail to meet “initial revenue targets.” 

High taxes can further restrict revenue by eliminating vendors. Hefty taxes have gutted brick-and-mortar retailers across the country. For example, 120 vape shops closed within the first year of Pennsylvania implementing a 40% wholesale e-cigarette tax.

Taxes on vapes not only endanger the financial health of FTF but also the physical health of Arizonans. Tobacco use is still the leading cause of preventable death in Arizona. Vaping may not be risk-free, but it can reduce the harm of consuming nicotine.

Public Health England found vaping to be 95% less harmful than smoking. E-cigarette vapor contains substantially fewer toxic chemicals, with “levels up to 450 times lower than tobacco smoke.”

Not only is vaping a harm reduction tool, but it can also help smokers quit. E-cigarettes are found to help twice as many people quit smoking as traditional nicotine replacement therapy.

Another study published in the New England Journal of Medicine with participants randomly assigned to use vaping or nicotine replacement therapy with cessation therapy. After six months, 28.9% of the participants in the e-cigarette group had abstained from smoking versus 16.3% in the control group.

Essentially, a tax on vaping might jeopardize our progress toward a smoke-free Arizona. Increasing the tax on e-cigarettes by $1 per ml is correlated with a “3.7 percentage point increase in rates of recent smoking.” That suggests that vapers may revert to cigarettes.

For vapers who refuse to go back to cigarettes, they can buy their e-cigarettes in other states. Currently, all states bordering Arizona impose excise taxes on vaping products. 

Destinations like Idaho and Texas don’t have e-cigarette taxes and are popular with Arizonans. If lawmakers levy a tax higher than that of our neighboring states, Arizona might lose revenue to New Mexico.

Consumers who don’t want to cross state lines can still avoid taxes by turning to illicit e-cigarettes on the black market.

Despite state and federal crackdowns, bootleg vapes are still flowing, making up “roughly 70%” of the market. Illicit and untaxed vapes are easily accessible from online vendors. A study conducted by Mejorado et al. found that none of the foreign online vendors applied state excise taxes to their orders. 

Outside of dwindling revenue, illegal vapes present serious health risks. Exposing vapers to high concentrations of toxins such as pesticides, lead and other heavy metals.

Beyond the possible adulterants, illegal e-cigarettes are more prone to malfunctioning and overheating, posing a fire hazard, due to the poor construction and use of faulty batteries. 

Vape taxes will face the same hurdles as taxing tobacco. These taxes are politically convenient, but will fail to fund FTF and endanger public health. State representatives should seek alternative sources of revenue. 

Peter Clark is an Arizona-based writer.