Combustible cigarettes and e-cigarettes are what economists call ‘substitute goods.’ The proposed tax will push people toward the deadlier option.
One of the many goals of the Build Back Better plan is to improve the health of the public. Yet members of Congress have undermined that goal by including a tax on nonconventional nicotine products, including e-cigarettes and nicotine pouches, but not raising taxes on cigarettes.
The tax on e-cigarettes is undoubtedly well-intentioned. Legislators rightly share the public’s concerns about widespread youth vaping and about some manufactures’ despicable marketing of e-cigarettes to children. By substantially raising the price of e-cigarettes — by about 25 percent, for a typical user — the tax will certainly discourage youths from using these products. That benefit comes at a steep public health cost, however: The tax will increase cigarette smoking among adults — and quite possibly teenagers, too. And any increase in smoking, which kills about 480,000 Americans annually, will lead to higher rates of disease and death in this country.
The problem with the tax is simple. Economic studies demonstrate that cigarettes and e-cigarettes are substitutes for each other. If cigarettes become more costly relative to e-cigarettes, some cigarette smokers will switch to e-cigarettes. Conversely, if e-cigarette prices rise relative to cigarette prices — as they will under the legislation’s tax provision — some people will smoke cigarettes who would otherwise have used e-cigarettes.
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Kenneth E. Warner – Washington Post – 2021-22-2021.