Congratulations Minnesota! You “Saved” 32,400 Smokers from Quitting

Minnesota in 2010 became the first state to impose an e-cigarette excise tax, set at 35% of the wholesale price.  Three years later, the tax was increased to a whopping 95%.  It remains the nation’s highest e-cigarette tax.

Economists at the National Bureau of Economic Research, the City University of New York and Bentley University just released a report on the consequences of the Minnesota tax.  Henry Saffer and colleagues looked at U.S. Census Bureau surveys from 1992 to 2015, in order to understand Minnesota smoking trends compared with states that did not impose a large e-cigarette tax.  Saffer and colleagues excluded Massachusetts and Illinois, where cigarette excise taxes rose by $1.00 after 2010.

Figure 4 from the publication illustrates Saffer’s results.  While the decline in smoking flattened out in Minnesota after e-cigarette taxes were levied, the decline in the rest of the U.S. remained more pronounced. 

Saffer and colleagues report: “We find consistent and robust evidence that the e-cig tax in MN increased adult smoking relative to what it would have been in the absence of this tax… In 2014 there were about 600,000 adult smokers in Minnesota.  Our estimates indicate that the e-cig tax deterred about 32,400 adult smokers from quitting.” (emphasis added)

The authors add a warning to legislators and policymakers across the U.S.: “Currently there are approximately 34 million adult smokers.  If the Minnesota tax had been a national one, we estimate that it would have deterred around 1.83 million smokers from quitting.  Some have suggested that e-cigs should be taxed at the same rate as cigarettes.  Implementation of that policy would raise the price of e-cigs by approximately 62 percent, increase smoking participation by 8.1 percent, and deter approximately 2.75 million smokers from quitting.”

Saffer’s findings compliment those from a study earlier this year by economists at Georgia State, Temple University and the University of Kentucky.  Michael Pesko and colleagues found that “higher traditional cigarette taxes reduce adult traditional cigarette use and increase adult e-cigarette use, suggesting that the products are economic substitutes.” 

Two years ago, my colleague and I published a tobacco tax proposal for Kentucky.  We encouraged lawmakers to raise the cigarette tax but keep the tax on smoke-free products low (for smokeless) or nonexistent (for e-cigarettes).  Our proposal was adopted by the Kentucky legislature in 2018. 

Making e-cigarettes less accessible and more expensive keeps smokers smoking.  Unfortunately, this simple economic concept is routinely ignored by tobacco prohibitionists at all government levels.   

Kentucky Adopts a Rational Tobacco Tax Plan

Last month, the Kentucky legislature overrode Governor Matt Bevin’s veto and passed HB366 (here), a tax reform bill that increased cigarette excise taxes from $0.60 to $1.10, while leaving taxes on smokeless products unchanged and leaving e-cigarettes with no excise tax.

This policy mirrors the tax plan that my research group designed (here) – one endorsed by 16 tobacco research and economic policy experts from across the nation, and by the Pegasus Institute (here).  Watch my interview with Nick Storm of Spectrum News here to learn more.

Enacting this plan, legislators rejected demands from anti-tobacco crusaders to double the cigarette tax increase and make vastly safer smokeless and e-cigarettes equally expensive.  One of their spokesmen, Foundation for a Healthy Kentucky president Ben Chandler, had argued, “you’ve got to have the sticker shock…” (here)

That reasoning is both insensitive and nonsensical.  Many Kentucky smokers are unable or unwilling to quit tobacco and nicotine entirely.  For them, traditional quit-smoking methods, which strive for nicotine and tobacco abstinence, don’t work. 

Our tax plan encourages and incentivizes smokers to quit or switch to less expensive and vastly safer smoke-free tobacco products, including smokeless tobacco and e-cigarettes. 

Decades of epidemiologic studies document that the health risks of dipping and chewing tobacco are, at most, a mere two percent of those associated with smoking.  Unlike cigarettes, smokeless tobacco does not cause lung cancer, heart and circulatory diseases or emphysema.  A recent study conducted by federal researchers and experienced epidemiologists found that men who dip or chew tobacco have no excess risk for mouth cancer (here).    

Our plan also encourages smokers to switch to e-cigarettes, which already are among the most common – and most successful – quit aids in the U.S. (here). 

HB366 contains another provision favoring reduced risk products.  Kentucky excise taxes will be reduced by half for products that are permitted by the FDA to be marketed as “lower risk.” 

Reduced risk applications have already been filed with the FDA for three products: IQOS heat sticks, Camel Snus and Copenhagen moist snuff.  Science tells us that all of these are vastly safer than cigarettes.  The question is: When will the FDA acknowledge this indisputable fact?