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Tobacco users like lower cost of ‘vaping,' worry about taxes

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In this 2014 file photo, Alabama Vapor owner, Tanja Bentley uses an e-cigarette at her store in Bynum.

While the debate over whether electronic cigarettes are a safer option for smokers is far from over, one thing is certain: “vaping” with e-cigarettes is cheaper than smoking conventional cigarettes.

How much longer it will be cheaper than cigarettes could depend on whether Alabama’s lawmakers decide to levy excise taxes on the tobacco alternative. And lawmakers’ decisions on taxing such products may be based on their health effects. Those health effects, however, are largely unknown so far.

Tonja Bentley, owner of Alabama Vapor on Bynum Boulevard in Eastaboga,  said her products are much cheaper than smoking combustible cigarettes. Her store was the first to open in the Oxford area.

She said a smoker looking to switch can get started with a basic kit from her for around what they’d pay for a carton of cigarettes. After the initial cost of buying an e-cigarette device, users can vape — a word derived from “vapor” — for $6.25 per week, she said.

Marty Rollins, a regular customer at Alabama Vapor, said his e-cigarette saves him almost $300 a month — money that he used to burn on packs of cigarettes.

Rollins smoked for 25 years before deciding to try an e-cigarette two years ago. He and his wife each smoked two packs a day; now, Rollins can’t remember the last time he lit up. He spends $20 a month on “e-juice,” the mixture of organic compounds, food-grade flavorings and nicotine used in e-cigs.

Anniston resident Barry Bowerman said he’ll never go back to traditional cigarettes. He smoked a carton a week until his son introduced him to e-cigarettes. Now, he said, he’s saving $30 each week compared to what he used to spend on cigarettes.

But how much longer Rollins, Bowerman and other e-cigarette users will be saving money by vaporizing e-juice could depend on how Alabama decides to tax the new product.

Alabama Vapor’s Bentley says that right now, her customers only pay sales tax — 10 percent in Oxford — on electronic cigarettes and liquids.

Asked if she expects an extra tax on electronic cigarette products, Bentley said “I see it coming, most definitely, though I hope not any time soon. We’ll deal with it when it comes, hopefully without increasing prices drastically.”

Ken McElroy, owner of E-Cig South in Weaver, also thinks that something is coming.

“The feds don’t have a way to tax it currently,” he said. “They’re going to find a way to fix that.”

The federal government imposes a $1.01 tax on each pack of cigarettes. That gave it $15.5 billion in 2011.

Alabama levies about 43 cents on every pack of cigarettes; only four other states levy a lower tax, according to the Campaign for Tobacco-Free Kids. Nonetheless, the rate still generates hundreds of millions of dollars, much of it going to Medicaid services and other healthcare programs.

But collections have gone down in the last five years — from $140 million in the fiscal year ending in 2008 to $126 million in 2012. Taxes on other tobacco products, however, have increased, from $5.5 million in the fiscal year ending in 2008 to $7.4 million in 2012.

Calhoun County levies a 3 cent sales tax on each pack of cigarettes and other tobacco containers. Assistant County Administrator Melissia Wood said it generates about $375,000 each year. The number changes slightly each year, but Wood said she would be hesitant to say there’s any kind of trend.

To tax or not to tax

While the e-cigarette market is not as large as that of combustible cigarettes, it is growing. According to a study by Wells Fargo Securities tobacco analyst Bonnie Herzog, the global e-cigarette industry reached $2.2 billion in 2013.

And the London-based market research firm Euromonitor International found in 2011 that the U.S. was the largest market for the new product, with a quarter of all e-cigarette sales — almost $500 million.

McElroy believes that as e-cigarette use becomes even more widespread, the federal and state governments will want to recoup revenue lost from fewer people smoking tobacco.

The FDA in April gave the federal government a way to do that. E-juice derives its nicotine from stem and leaf tobacco, allowing the national regulatory agency to classify the alternative as a tobacco product.

Alabama in 2013 amended its code to define e-cigarettes as “alternative nicotine products.” The state Legislature has yet to levy an excise tax on either e-cigarette devices or the e-juice used in them.

Sen. Arthur Orr, R-Decatur, is chairman of the Senate’s Finance and Taxation General Fund committee. He said he’s heard no discussion in the Legislature about a tax on the products.

“No legislators here are suggesting that we tax e-cigarettes like traditional cigarettes,” he said.

He acknowledged that the products are only subject to sales tax. Whether there should be any extra tax would be “something that various states across the nation will look into in the future,” he said.

Unknown effects

Orr said that one justification for the extra tax paid on cigarettes is the negative impact on the consumer’s health.

“Is there a negative impact on an electronic cigarette user’s health? I don’t have an answer for that,” he said.

Neither does the FDA; the agency claims the products have not been fully studied.

Yet the CDC acknowledged in a press release that “e-cigarettes appear to have far fewer of the toxins found in smoke compared to traditional cigarettes.” Many proponents of e-cigarette use are quick to tout that as proof of the relative safety of the tobacco alternative.

But, said Chris Farmer-Lies of the Association of Non-Smokers of Minnesota, “if that’s the bar we’re setting — that these products are safer than cigarettes, the number one cause of preventable death in the world —  of course it’s really easy to beat.

“Our lungs are designed to breathe one thing, and that’s clean oxygen,” he said. “Anything else is going to result in undesirable health effects.”

Minnesota in 2012 chose to classify e-cigs as a tobacco product, allowing the state to tax them at 95 percent of their wholesale cost. This tax rate is comparable to the rate on conventional cigarettes in Minnesota, which is $2.83 per pack.

That tax rate more than doubled in 2013, up from $1.23 per pack. Farmer-Lies said that last year’s tax increase coincided with both a decrease in combustible cigarette sales and a jump in the sale and use of electronic cigarettes.

Now there are three vape shops within walking distance of his association’s office in Ramsey County, Minn., Farmer-Lies said, and as many as 200 e-cigarette shops have sprouted up across the state.

He said that because the three biggest tobacco companies — Lorillard, Altria Group, and R.J. Reynolds Tobacco — control the largest portion of the e-cig market, they stand to gain the most from increased e-cigarette use.

“There is a definite correlation between the rise in e-cigarette popularity and the rise in tobacco tax,” said Farmer-Lies. “This is an industry strategy to get around tobacco taxes.”

Those taxes not only generate additional revenue for state, county and city governments, but also provide an extra financial burden that pushes some smokers to quit, anti-smoking advocates say. The Campaign for Tobacco Free Kids says that a 10 percent increase in cigarette prices decreases rates of youth smoking by 7 percent, and overall smoking by 4 percent.

Gateway smoke?

The CDC’s main concern is whether the increasing popularity of electronic cigarettes will push adolescents to start smoking combustible cigarettes.

The American Cancer Society shares that fear. Ginny Campbell, who is Government Relations Director at the society’s advocacy organization, the Cancer Action Network, said the novelty of electronic cigarettes might draw youths in.

Add to that novelty the myriad e-juice flavors available — like bubblegum, peppermint and chocolate — and you’ve got the possibility of a gateway to conventional cigarettes, Campbell said.

Campbell and the American Cancer Society worry that “many young people do not realize there could be negative health effects associated with these products.”

Marty Rollins and Barry Bowerman both say they doubt their new habit is any more harmful than the one they replaced.

Rollins said his doctor is “very happy” with him for switching to e-cigs, and says his lungs are “clearer now than they have been in years.” Bowerman claims to be sleeping better, and doesn’t miss the ever-present stink of cigarette smoke.

Alabama e-cigarette users like Rollins and Bowerman may end up paying more for their vapor in the future. Both men said that would be fine with them.

“I wouldn’t care if they started taxing it like tobacco,” said Rollins. “Nicotine is a tobacco product. I just hope it doesn’t get too crazy.”

 

Zach Tyler is a Jacksonville State University senior majoring in communication and an intern for The Star. Reach him at 256-235-3564 or m.ztyler18@gmail.com.