Bill to tax e-cigarettes whittled down; heavy tax on Juul-like pods remains; teens warned of health dangers of vaping and covid-19

The bill aims to reduce youth use of e-cigarettes. (Getty Images)

By Melissa Patrick
Kentucky Health News

A House bill aimed at reducing teen use of electronic cigarettes by increasing their price, while bringing the state more revenue, was trimmed down to its bare bones in the Senate and is now expected to generate $25 million, not $50 million.

"The amended bill only covers vaping and Juul-type products," said Sen. Chris McDaniel, chair of the Senate Appropriations and Revenue Committee. "The floor [stock] tax is eliminated as part of this. It is a 15% wholesale and $1.50 per-pod tax and that is the entirety of the bill."

Later, McDaniel said he had realized that the floor-stock tax on existing inventory had not been deleted from the amended version of the bill and said he would file a Senate floor amendment to get rid of it. The new version of House  Bill 32 is expected to generate an estimated $9 million in 2021 and $16 million in 2022.

The House version of the bill would have put a 25 percent wholesale tax on e-cigarette products, while raising the wholesale tax for "other tobacco products," such as cigars, to 25% from the current 15%, and add e-cigs to the list. It would have also doubled the per-unit tax on chewable and non-smokable products, but did not mention the tax on traditional cigarettes.

The bill, sponsored by Rep. Jerry Miller, R-Louisville, has been a priority for the Foundation for a Healthy Kentucky. President and CEO Ben Chandler told Kentucky Health News that while the foundation wanted the House version, it still considered it a win because of the pod tax.

"We think by and large this is good news," Chandler said. "We believe that the tax on pods, which is about $1.50 per pod, would put a significant dent in the youth use of cartridge-based e-cigarettes, like Juul. . . . All data shows that if the price goes up, youth use goes down, and we're interested in seeing a decline in youth use."  

According to the 2019 Youth Risk Behavior Survey, nearly 54% of Kentucky high-school students and 31% of middle-school students said they had tried an electronic "vaping" product and 26% of the high schoolers and 17% of the middle schoolers said they had used them during the 30 days before the survey.

Chandler stressed that it is especially important right now to get the word out to teens to stop using these products because they are known to damage the lungs, particularly while the coronavirus is going around.

"The coronavirus is a disease that attacks the lungs and if the lungs are damaged, it makes a person much more vulnerable," he said.

Miller also sounded a warning about smoking while this virus is going around. "The preliminary research does say that smokers as well as vapers are a little more susceptible to covid-19 because it is a respiratory disease," he said.

Chris Mooney of The Washington Post reports, "Experts note that damage to the lungs from pollutants that result from combustion -- whether inhaled deliberately by smokers, or inadvertently by those in regions with poor air quality -- may increase the risk of respiratory tract infections from viruses such as the novel coronavirus. Poor air can also cause lung inflammation that could worsen the symptoms of covid-19."

Industry was willing to accept a lower tax, might still get it

Tony Florence and Adam Seizemore of the Kentucky Smoke Free Association, an organization that represents about 300 "vape" shops in Kentucky, spoke against the bill.

Asked if the association could support the 15% tax,  Florence said, "That is still a fairly substantial burden. . . . For us, 10% was the magic number and we had discussed that with several senators, so I'm not comfortable saying whether 15% would be acceptable or not, but it is a far cry better than 25."

Some senators expressed interest in lowering the tax when the bill gets to the full Senate.

Florence said he was pleased that the new version of the bill did not include the floor-stock tax or an additional hardware tax, which McDaniel said would only be subject to the 6% sales tax.

"You all have done most of the work for me," Florence told McDaniel. "That's great."

Chandler said removal of the floor-stock tax was a mystery. He said it would have kept retailers from piling up inventory at the lower tax rate. "We're sorry that that was removed," he said.

"Vape" shops generally don't sell closed systems that use pods, like Juul, which are most popular with youth, but instead sell open-tank systems that "vapers" fill with e-liquids.

Florence cited a National Bureau of Economic Research study that found  for each 10% shift in e-cigarette price, there was a corresponding 26% reduction in e-cigarette sales and an 11% increase in combustible cigarette sales.  He also cautioned that excessive taxes on e-cigarettes would create a black market for the products. "Vape taxes drive people back to smoking," he said.

He called e-cigarettes as a "harm reduction product" and said they were "95% safer than traditional combustible cigarettes." He said it was the industry's goal to transition people off of combustible cigarettes to "a much less harmful product."

Florence referred to a British study that was debunked in a recent American Journal of Public Health article, which included an appendix of research to back up its conclusions. It said, "The evidence-lacking estimate derived in 2013 cannot be valid today and should not be relied upon further."

And a 700-page U.S. Department of Health and Human Services report says more research is needed before it can be concluded that e-cigs help people stop smoking.

The current version of the bill does not tax disposable, flavored e-cigarettes, which have become popular with youth since the FDA imposed a partial flavor ban that did not apply to these products, but Miller said he would make sure they are included in the final version of the bill.

"When we do the conference committee to reconcile the Senate and House versions of HB 32, I will make sure the final language covers disposables and non-disposables in the per cartridge tax," he said in an e-mail.

Chandler said the foundation had been able to see only snippets of the amended bill, taken on someone's cell phone, because the Capitol and Annex are closed to all but members, staff, news media and other designated persons. The committee substitute had not been posted as of 11:30 p.m. Thursday.