The House of Representatives is reportedly considering a vote today on their deeply flawed $1.85 trillion tax-and-spend package known as the “Build Back Better Act.” The potential vote comes after Democratic leadership just yesterday unveiled the latest iteration of their massive bill through a 2,135 page manager’s amendment. While it's unlikely most lawmakers have even read the bill, they should be aware that this disastrous bill contains a concerning provision to raise taxes on nicotine - a tax that disproportionately impacts lower- and middle-income Americans.
The inclusion of the nicotine tax is a slightly unexpected, but not entirely surprising. In September, the Ways and Means Committee approved their portion of the reconciliation bill that contained a $96 billion tax on cigarettes, vapor products, and other traditional tobacco products. Yet, following significant resistance from taxpayers and consumers, House leaders removed the provision in the updated bill that was released just last week. But like most bad policy ideas in Washington, they always seem to come back at the most inopportune times, and in section 138520 of this week’s bill is the revived policy to tax nicotine.
Taxpayers and consumers should be rightly dismayed by this development, as it is a direct tax increase on Americans that choose to use nicotine products. Certainly, this version is better than the Committee passed bill as it appears the federal cigarette excise tax increase is no longer included in the manager's amendment, that’s about the entirety of the “positive” news. Their bill would still tax nicotine at a rate of $50.33 per 1,810 milligrams, which is clearly a tax designed to impact vapor and other e-liquid products. If implemented, this tax would likely lead to consumers paying a higher tax rate on tobacco-harm reduction products than they would on a 20-pack of cigarettes.
Ironically, a tax on nicotine could make it more likely for consumers to choose cigarettes and disincentivize them from switching to less harmful vapor products. These innovative products have proven to be an effective cigarette cessation tool for smokers who want to quit their habit. A landmark 2019 New England Journal of Medicine study documents that smoking cessation is two times more likely to occur in those who used e-cigarettes as compared to individuals using other nicotine replacement products. Further, research by Public Health England and the Royal College of Physicians finds that vaping is up to 95 percent less harmful than combustible tobacco use. There is a consensus in the United Kingdom among academics, scientists, and the medical community that reduced-risk tobacco alternatives such as vaping e-cigarettes are significantly less harmful than smoking combustible cigarettes.
The science backs up the fact that e-cigarette and vapor products are significantly less harmful than traditional cigarettes; therefore it makes little sense to tax them at similar, and in some cases higher levels. Aside from ensuring a product’s tax rate is commensurate with its level of individual risk, a poorly thought out tax increase could have damaging effects on the economy. As American businesses and taxpayers emerge from the health and economic crisis of the last year, it would be extremely unwise to raise taxes.
Democrats already once left the original tobacco and nicotine tax on the cutting room floor during their negotiations, and they would be wise to do the same with this modified version. The $1.85 trillion is bad enough as it is, the least they can do to improve it is remove a multi-billion dollar tax on nicotine users. With the proposed tax finding its way in the bill, Sen. Joe Manchin (D-WV) was asked his thoughts on the provision, he responded by saying “a tax on nicotine? That doesn't make any sense to me whatsoever.” On behalf of taxpayers and consumers nationwide, let’s hope Sen. Manchin and others fight to remove it -- or better yet, that the bill never reaches the President’s desk.