During January, 2015, when Utah was deciding whether to levy a tax on e-cigarettes, the owner of Vapor Mania said, “I think we’d be out of business, or at least it would make it much harder to do business.”
As of mid-March 2016, Utah still did not have an e-cigarette tax.
But these municipalities did:
Where are we going? To the incentives that taxes create.
The E-Cigarette Tax Debate
First, to clarify (as I needed to do), an e-cigarette provides the feel of smoking through a battery powered device that delivers vaporized (hence, the name vaping) nicotine. Flavored by shops like Vapor Mania, that nicotine syrup could even taste like strawberry short cake ice cream.
When legislators debate e-cigarette taxes, there are so many ideas floating around. They have to think of health and whether e-cigarettes help people stop smoking or act as a teenage gateway drug. They have to consider revenue and whether a high rate will shift some individuals back to tobacco and send others across state lines.
Our Bottom Line: Tax incentives
Taxes create incentives.
Below, we seem to have a correlation between price and the quantity demanded of cigarettes:
Similarly, for pipe tobacco and cigars, when tobacco taxes elevated prices, the quantity demanded went down.
So, when the owner of Vapor Mania predicts the impact of an e-cigarette tax, he is just talking about the power of a tax incentive.