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A number of states are debating whether or not to tax electronic cigarettes above and beyond normal product sales taxes. Many claim to be considering excessively high taxes in the name of public health, but most seem only hopeful that the revenue will make up for lost tobacco cigarette taxes (which have been declining with the industry as a whole). Minnesota already pushed through a high tax, where electronic cigarettes are taxed at a rate of 95% of the wholesale cost.

There’s a lot of problems with these efforts. Among other things, there has yet to be any proof that electronic cigarette businesses and users require or, indeed, deserve to be taxed above that of standard retail sales. The justification of tobacco taxes was always that the state needed to recoup the health care cost of its smoking citizens, funnel funds towards anti-smoking campaigning, and discourage smoking through high prices as much as possible. None of that currently applies to electronic cigarettes without extensive research proving that these are issues (and thus far it looks like they aren’t).

Beyond that is the issue of supporting small business and avoiding criminal markets. Olympia, Washington failed to pass a 75% tax on electronic cigarettes and it was thanks in part to local business owners that argued against the tax because it would force them to move their business. In particular, they wouldn’t be able to compete with online shops. Small retail stores are finding it almost impossible to compete with the online marketplace due to the excessive overhead of running a storefront (employees, utilities, maintenance, etc). Taxing them out of the competitive market only sends them elsewhere or forces them to close entirely.

Another issue is the growth of a black market to avoid high prices and bans. A whooping 66% of vapers said in a survey that they would purchase from a black market if they had to in order to acquire electronic cigarettes.

If you need proof that criminal smuggling is alive and well, just check out recent research from the Tax Foundation. States which tax cigarettes at high rates experience rampant tobacco smuggling. It’s so bad that roughly half of cigarettes smoked in New York, Arizona, and New Mexico (where cigarette taxes are high) are smuggled in from other states. This isn’t just a few people near state lines grabbing a pack from neighboring communities. There is an entire culture undermining the tax effort against cigarettes. And why not? It’s way in a business’s favor to sell smuggled and distinctly cheaper cigarettes than to go the legal (and paperwork-heavy) route of tracking and paying taxes for all their goods.

This will happen with electronic cigarettes if states and cities continue to put their own taxes on the products. The justification may not be financial — some places institute things like this because they want to discourage a sort of business. For instance, there is a surprising number of cities our there which have ordinances on the books requiring a larger than average cage size for farm pigs. This is not done for humane reasons, but to discourage pig farms which are significant sources of pollution and odor.

Luckily, some places are starting to see that these taxes (and other measure) are not only frivolous, but may also be harmful to the local economy and the health of local smokers.