Of course, cigarette taxes in particular have never really been about externalities. If they were, every penny of revenue would go to smoking-related healthcare. Instead, dozens of states earmark some cigarette tax revenue for education (I still can't believe teachers who rely on cigarette tax revenue for their raises aren't leaving cartons of Lucky Strikes on their kids' desks). I've had a dozen lawmakers tell me that cigarette taxes aren't about externalities. They're about grabbing money -- in this case from a frowned-upon minority.
Yes, cigarette taxes are hard to oppose because, well, smoking is bad for you. Moreover, the cigarette makers have a sordid history that makes anyone thinking of opposing more taxes on their products squeamish.
Taxing cigarettes isn't all about grabbing money, of course. There are folks like Michael Bloomberg and his ilk who just like to tell people what to do: Don't eat salt, don't eat fat, don't drink, don't get high, don't own guns, etc. They're tiresome, but their arrogance seems boundless.
So now they want to tax e-cigarettes. Why? I like to think it's because many people enjoy them. I know lots of folks who swear by them. Liberal elites can't fathom people making their own choices about what to put in their bodies (conservatives have their own set of issues about what I can or can't do, but smoking as an issue belongs to the liberals).
Taxing e-cigarettes is a money grab. If people use e-cigarettes instead of real cigarettes, the state loses money. The vested interests like the public employee unions and the myriad government contractors can't have that. But proponents won't admit the money-grabbing motive. They pretend there are actually externalities to be addressed. Now, truthfully, we really don't know what the long-term effects of e-cigarette use are, but at the moment there's no evidence they're dangerous.
Actually, there is evidence that e-cigarettes have positive externalities. A recent study in the journal Addiction found that e-cigarette users were more likely to give up real cigarettes. If that's true, we should be subsidizing e-cigarettes, not making them more expensive. Yet politicians routinely say that e-cigarettes will lead people to start smoking, or worse -- use drugs! Are they daft? Shouldn't those who want to impose a special tax on a product have the burden of proving its dangers?
This post is an excerpt of article that first appeared in State Tax Notes magazine.