It’s Tax (Threat) Season!
As legislative sessions kick off across the country, three-fifths of states face overspending problems, a strong indicator of which states may consider tax hikes. Where the willpower to rein in spending fails, consumers and businesses like you may end up paying the price.
Headed into 2017, seven states have excise taxes for vapor products on the books, with only one (California) yet to take effect. Though enforcement is somewhat unclear, Kansas’s 20 cents per mL tax took effect on January 1.
No one factor determines the success or failure of an effort to raise taxes, cut spending, or rein in government. History, however, strongly indicates that where there’s smoke, there may be fire. Where lawmakers are looking for an easy target, they see smokers. And where they see smokers, a few will see vapers too.
Based on a number of factors, here are the tax threat trends and states to watch for:
- As fell California, so too may Oregon and Washington, which both face significant overspending problems this year and a below average commitment to spending restraint. The domino effect.
- Low energy costs are great for consumers and horrible for states that rely on high prices for tax revenue. Cigarettes are on the chopping block as a result in Oklahoma and Alaska, which both face significant reoccurring shortfalls. Vapor can always make an entrance in these situations.
- Indiana has a House speaker who wants to raise the cigarette tax and a new governor who seems less committed to its opposition than VP-elect Mike Pence was last year. Watch for a proposal to raise the cigarette tax and a potential new vapor tax that comes with a “compromise” offer from lawmakers to reform the current state vapor regulation. “Do you want destructive regulations that kill your business or a small tax you can live with?” I can envision them asking. I suspect I’ll be headed back to Indiana soon…
- It’s biennial budget year in Ohio and the incumbent governor proposed a vapor tax as part of his large tax reform package 2 years ago. I wouldn’t be surprised if another round of income tax cuts were proposed, paired with tax hikes on a number of industries including vapor (cigarette tax went up in ’15).
- New York is interesting. The state already has the highest cigarette tax in the nation ($4.35 statewide, $5.85 in NYC). I don’t see the cigarette tax going up any time soon (half the state’s cigarettes are smuggled in via black market for God’s sake!) so will a stand alone vapor tax bill rear its ugly head in the midst of growing overspending problems? It’s also now is the state represented by the U.S. Senate Minority leader who has called for recalls of “ticking time bomb” vapor products. There are tax proposals every year… But I don’t think this is going to be the year it happens.
- The annual “It Looks Like Smoking” crowd shuffling in to justify a wide range of vapor taxes across the country. Budget shortfalls just give proponents another reason to come for your money. This may explain proposals in +10 states this year.
- Hawaii considers A LOT of tobacco bills every year and was the first state to raise the age to smoke/vape to 21. The state had to make this list.
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