Ranging from Argentina to Uganda, countries have banned e-cigarette sales. Elsewhere, hoping to minimize smoking, nations use e-cigarette taxes.
The taxes though have had unintended consequences.
Let’s take a look.
E-Cigarette Taxes
Globally, we have 30 countries that ban e-cigarettes and four that limit the ban to nicotine containing e-cigarettes. Meanwhile, among the 49 nations that depend on a regulatory approach, 16 use taxes.
These are the 16 with e-cigarette taxes:
I assume that the U.S. is not included in the country list because there is no federal tax. However, as of March 2021, there were 30 states that taxed e-cigarettes to reduce youth vaping. In a recent study, researchers looked at the impact of those taxes on youth “combustible tobacco use.” Because cigarettes are more harmful than what researchers called ENDS (electronic nicotine delivery systems), they wondered if less use of ENDS just nudged young people to the more dangerous alternative.
Ir did.
Researchers looked at the 10 states and two counties that were the earliest tax adopters:
As we would expect, ENDS taxes diminished youth e-cigarette use. However, they could be doing more harm than good. ENDS taxes shifted use to cigarettes and resulted in informal ENDS sources rather than retail purchases.
Our Bottom Line: Unintended Consequences
Several economic ideas explain how e-cigarette taxation unfolded.
We started with a Pigovian tax. Explained by British economist Arthur Pigou (1877-1959), taxes can raise revenue and minimize harmful behavior. But then, we created an elasticity problem. According to the economic concept of elasticity, our demand is elastic when a price increase results in much less buying. And finally, we had substitute products. E-cigarette elasticities made regular cigarettes more attractive.
It all adds up to unintended consequences.
My sources and more: Always handy for making me more knowledgeable, the Hutchins Roundup alerted me to the smoking study. From there, I found a NY Times column that simply summarized the issues. Then, complementing all I read, the Global Tobacco Control website had all you could want to know about e-cigarette policies in 100 countries.
