California’s new Vape tax will put pressure on synthetic nicotine
On October 4th California Governor Gavin Newsom approved a 12.5 per cent excise tax on vaping products.
The bill, drafted by Democratic state Sen. Anna Caballero, aims to tax pumped products at a rate close to cigarettes and, according to the theory, discourage young people from breathing. The tax is expected to generate $38.4 million by 2023, the Los Angeles Times reported, “and the funding will be divided into several programs, including early childhood education, public health education, and health education grants for students from poor communities.” ”
One can only hope that these courses will teach students better scientific and economic knowledge than the creators. The usual criticism of vape taxes is applicable: because cigarettes and vape are alternatives, the former should logically impose more taxes than the latter to encourage people to switch to less harmful alternatives. California also imposes a wholesale tax of about 60 percent on vape distributors, although customers may not necessarily experience that burden.
Stefan Didak, an advocate for tobacco harm reduction (THR) in California, told Filer: “Most manufacturers that have to levy or waive wholesale taxes have decided not to ‘eat’ it on retailers and consumers. ”。“ Part of the reason is that it’s more economical for them to tinker with, counting only the taxes on the portion of nicotine that enters the bottle itself, and partly for competitive reasons. ”
As a result, he explains, “consumers are not feeling the real impact of the state.” However, “with a 12.5 per cent retail tax, it will certainly be felt.” ”
THR advocates, vape producers and consumer advocates are already on high alert: the new federal tax proposal circulating in Washington in mid-September would raise e-cigarette taxes to match tobacco and make them more expensive than deadly combustibles. Specifically, the proposed tax rate for every 1,000 cigarettes would be raised to $100.66, and the gas extraction products would be taxed at the same rate, with 1,000 cigarettes equivalent to 1,810 milligrams of nicotine. (Early estimates by critics and tax reformers, for example, put the tax rate on a pack of four Juul beans at about $9, while the tax rate on a pack of cigarettes at about $2.) ）
With these state and federal taxes still under threat, California will become one of the states that marijuana users can afford. Tougher local policies seem to backfire, even as teen smoking rates fall again nationwide in 2021: A study published in JAMA Pediatrics found that teenagers in the city’s high schools were more likely to smoke after San Francisco banned flavored steam and tobacco products than teenagers in other school districts.
But a less discussed aspect of the new tax leaves California’s vape producers facing potential legal constraints and shows how the THR war will unfold in all aspects of the United States. That’s because California’s tax code defines “tobacco products” as including, but not limited to, “products containing, manufactured, or derived from tobacco or nicotine” — meaning that these excise and wholesale taxes explicitly apply to “Synthetic Nicotine.”
The agency’s definition of “tobacco product” as “anything made or derived from tobacco for human consumption, including any ingredient, part or attachment to a tobacco product” (my own focus) seems to exclude Synthetic Nicotine.
In short, California’s policies may weigh the loopholes manufacturers have been considering, which could give vapers an option rather than switch to cheaper, more riskier illegal markets.
Taxes aside, Synthetic Nicotine is expensive because the process of industrializing nicotine production remains difficult. For manufacturers, this is the last resort to keep the business going. However, the new tax could create a situation in which California-born vape producers, increasingly using synthetic nicotine to avoid FDA targeting, may have to pull out of the job.
“Unfortunately, I have observed that some electronic liquid manufacturers in the state have expressed an interest in adapting to synthetic nicotine and mistakenly believe that it is completely unregulated and tax-exempt,” Didak said. ”。“ No one wants to see the california Tax Administration’s authority used against small businesses because it provides an easier enforcement mechanism. As it did during the alcohol ban, those caught were more likely to evade taxes. ”
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