Over one quarter of Pennsylvania vape shops have closed as a result of the 40% tax on vaping products
It’s been just over eleven months since the 40% tax on vaping products took effect in Pennsylvania. The wholesale tax covers e-cigarettes, e-liquids, as well as any other product sold for vaping. This tax was implemented in part to help state legislators build their budget without having to raise either the personal income tax or the statewide sales tax. The 2017 Mercatus Center, State Fiscal Rankings placed Pennsylvania 45th in fiscal health, citing among other things a “negative net asset ratio” which indicates debt and large unfunded obligations. Figures like this indicate a motive for state legislators to attempt avoiding blame. This effectively passes the cost of their mistakes onto small business owners in an already unfairly unpopular industry.
The Department of Revenue calculated the tax has produced an additional 13.7 million in revenue for the state. But this comes at a steep price as the Vapor Technology Association reports that over 100 vape shops across the state, roughly one quarter of the total, have closed. Mike Londino, the owner of Vape O2 in Philadelphia has been one of the lucky ones; by making some drastic changes and cuts he’s been able to stay afloat. But he admits that things are not like they use to be, and seeing so many friends and colleagues close their doors for good is hard. Any shops hoping to stay open for business have been forced to raise their prices across the board in addition to deep cuts in their profit margins.
These changes trickle all the way down to the consumer and make access and understanding of vaping that much more difficult. With all the misinformation that fuels public perception of vaping and its risks, the last thing the industry needs is another reason for potential adopters to hesitate about the switch. Some savvy vapers have even taken their business online to avoid marked up prices which is further cutting into the demand for Pennsylvania based vaping businesses.
Lobbying for Alternatives
Many who say the 40% tax is too high advocate instead for a 5 cent per milliliter tax at the register. While there is currently very little movement on that front, store owners say anything under 7.5 cents per milliliter would still benefit them immensely. Conversely, they acknowledge anything over the 7.5 cents could potentially close half of the remaining vape shops within a year. Executive Director of the Consumer Advocates for Smoke-Free Alternatives Association, Alex Clark, questions the motives behind the tax, “You have people switching to a product that’s taxed less, and I think you have lawmakers looking at that and saying, we’re losing a bunch of money. Which is very unfortunate, because this becomes less about public health and more about state tobacco revenues.”
Just The Beginning
Pennsylvania is far from the only state faced with serious financial questions. They’re also not the only state with a large vaping population that can be taken advantage of. As long as the general public still believes that vaping is essentially as dangerous as traditional cigarettes, it will be extremely easy for legislators to force through further laws and taxes under the guise of public safety. But if politicians really wanted to help people live longer by quitting cigarettes they would support vaping, not actively disadvantage it. It falls on the vaping community at large to help inform our smoking friends that haven’t given e-cigarettes a chance. This is especially true when legislators decide it makes more political sense for them to target something that could potentially save millions of lives instead of doing the hard work needed to save them.
Do you think the tax is reasonable? Should Pennsylvania legislators have to find another way to pay for their budget? What impact do taxes like this have on vaping as a whole? Let us know what you think in the comments.