By Eric Fruits

To fill an anticipated $876 million budget hole in the 2019-21 biennium, the Oregon Health Authority is pursuing a $300 million increase in taxes on tobacco products, including e-cigarettes and other vapor products. The agency has not provided any indication what an e-cigarette tax would look like, which invites the question whether e-cigarettes and other vapor products should be taxed at all and, if so, at what rate?

One in six Oregon adults is a smoker. Nearly 70 percent of smokers report they want to quit completely. Yet, conventional attempts to quit -- such as “cold turkey”-- are notoriously unsuccessful. Many experts, including those at the American Cancer Society , believe that the best option for smokers who are unable or unwilling to quit smoking is to switch to a less harmful alternative with similar attributes, such as e-cigarettes.

Most of the harm from smoking is caused by the inhalation of toxins released through the burning of tobacco. Non-combustible nicotine delivery systems, such as e-cigarettes and smokeless tobacco are considered to be significantly less harmful than smoking cigarettes. For example, the U.K. government agency Public Health England concluded that e-cigarettes are around 95 percent less harmful than smoked cigarettes.

Research finds that increased e-cigarette use among adult smokers in the U.S. has been associated with a statistically significant increase in successful attempts to quit smoking cigarettes. In this way, e-cigarettes have been described as an “off ramp” from cigarette smoking.

The same is true for teen smokers. While many have decried teens’ increasing use of e-cigarettes, their use has been associated with a dramatic drop in teen smoking, according to the Centers for Disease Control . Meanwhile, there is little evidence of e-cigarettes being a “gateway” to smoking. Indeed, teen use of any “tobacco product” -- including e-cigarettes -- is at an all-time low.

In principle, one way to shift smokers from traditional cigarettes to safer alternatives is through differential taxation, in which conventional cigarettes are taxed at a higher rate than non-combustible products, such as e-cigarettes. This approach to harm reduction indicates that e-cigarettes should not be taxed. Or, they should be taxed at a significantly lower rate than combustible cigarettes.

Notwithstanding the media attention attracted by vapor products, especially the coverage of Juul Labs, e-cigarette sales represent less than one percent of total sales of tobacco products in the U.S. Thus, a tax on vapor products, at any level, would have virtually no impact on state tax revenues. Indeed, it is likely that the cost of collecting and enforcing a tax on vapor products would exceed the revenues generated from the tax.

A hasty pursuit of additional tax revenues or a desire to have “equitable” tax treatment of cigarettes and e-cigarettes may cause great harm -- and be counterproductive from a public finance perspective. High taxes on vapor products would discourage smokers from switching to less harmful alternatives and the additional public health costs may exceed the additional tax revenues.

With such high risks and costs associated with cigarette smoking, taxes and regulations should seek to encourage smokers who can’t quit to switch to less harmful products. Reducing harm should be the objective, rather than an unattainable goal of zero harm or in an overt pursuit of tax revenues.

Eric Fruits, Ph.D., is the chief economist for the International Center for Law & Economics, and an adjunct economics professor at Portland State University.