Board considers E- cigarette tax to deter next generation of nicotine users

May 5, 2015

Dr. Jennifer Vines, deputy health officer with Multnomah County addresses the Board of Commissioners on May 5.

After restricting youth access to e-cigarettes and banning vaping in workplaces in March, the Multnomah County Board of Commissioners heard today how imposing a tax on e-cigarettes could help curb the explosion of vaping among teens.

In the past year, e-cigarette use by minors has tripled nationwide.

“Our young people are inhaling a cocktail of chemicals, some of which are known, and some of which are unknown, and among those of course is highly addictive nicotine,” said Dr. Jennifer Vines, deputy health officer with Multnomah County. “Thank you for banning the use of e-cigarettes by minors. That’s a vital first step in addressing access at the point of sale. Today we’re going to talk about influencing demand.”

Vines urged the commissioners to consider employing a strategy that has proven to be effective in curbing teen cigarette use during the past 20 years - taxing the products to make them less accessible and using the proceeds to fund prevention and cessation.

Raising the price of cigarettes has been the most effective way to get smokers to quit and to prevent others from starting, according to the World Health Organization.

Multnomah County Chair Deborah Kafoury said Tuesday that the board would consider taking action if the legislature failed to take action this session.

“I’m struck by the discussion around taxation being the single most effective way to get people to quit and keep minors from starting,” she said. “If we had known 50 years ago what we know now about smoking we would have taken a stand long ago.”

The Oregon legislature is considering a number of bills that would regulate the use and sale of e-cigarettes. Two would require the state to collect excise taxes - HB 2134 and HB 2074. Both bills are backed by the public health community and opposed by industry groups and users of e-cigarettes.

“I would encourage you to look at the fiscal analysis of the state legislation, where they estimate anywhere from $20 to $70 million from a state e-cigarette tax,” Mel Rader of Upstream Public Health told the board.

Rhys Scholes of Multnomah County's Office of Government Relations at Tuesday's board briefing.

“On e-cigarettes, we’re behind the game,” he said. “Now more high schoolers use e-cigarettes than cigarettes and because of that I’d encourage us to look at policy strategies even when we don’t have a complete understanding of the research.”

The liquid, usually containing nicotine, is entirely unregulated by the U.S. government. The Food and Drug Administration is considering how to regulate the quality and content of e-cigarette liquids, but Multnomah County’s Dr. Vines said that could take years.

“That’s why we have communities engaging early on, rather than waiting years and years the way we did with tobacco,” she said, “and waiting and waiting and waiting for the science to come out and then we catch up.”

Rhys Scholes, policy manager in the Multnomah County Office of Government Relations, said the cost of vaping is half the cost of smoking. If a user buys in bulk, that price can drop to 25 percent.

At least 12 states have proposed legislation to tax e-cigarettes and supplies. Minnesota is one of only four jurisdictions  to have implemented the tax by extending an existing tax on “other tobacco products” to include any product “derived” from tobacco. That includes most e-cigarette liquids. The state taxes the wholesale price of those liquids at 95 percent.

For example, the nation’s best selling e-cigarettes are by Blu, recently sold by Lorillard (the maker of Newports) to Imperial Tobacco (the maker of Gauloises).

If a wholesaler can sell a disposable Blu e-cigarette for $6.36, Minnesota would collect an additional $6.04 in taxes on top of that. Most of the extra cost gets passed on to the consumer, and the high prices make those products less accessible to youth.

The county’s Chief Financial Officer Mark Campbell made two recommendations should the Board of County Commissioners consider moving forward with an e-cigarette tax.

“I would argue very strongly that whatever method is chosen, that it covers the administrative burden of collecting it,” he said. “I would strongly recommend that if we apply a tax, that we do it at the wholesale or distribution level, not the retail level.” 

The treasury section of the Department of County Management has a staff of four who manage banking services, the county’s investment portfolio and collect excise taxes for rental cars, lodging and gas.

Applying a tax at the wholesale level would be simpler to enforce than at the retailer level. It would be cheaper for the county and the companies that sell e-cigarettes.

At Tuesday’s briefing, Commissioner Judy Shiprack said that it might be obvious, but “anything that would assist us in keeping children away from smoking materials is probably good public policy.”  

Commissioner Jules Bailey, who has repeatedly suggested exploring an excise tax on e-cigarettes, said he was proud of the action the board has taken so far, but that they should consider the tax might help curb the demand.

“It is time to recognize vaping as the public health concern that it is, particularly for our youth,” Bailey, who was away at a conference, wrote in comments read during the briefing. “As an economist, I find myself too often remarking that ‘there is no market for public health.’ If we are serious about prevention, which I am, we will use every tool at our disposal to keep nicotine products out of the hands of young people.”