KY House panel approves $50 million tax increase on vaping, other tobacco products
A House committee on Tuesday approved a bill that would raise nearly $50 million over the next two years with a new excise tax on vaping products and a hike in existing taxes on tobacco products other than cigarettes.
At the hearing, state Rep. Jerry Miller, R-Louisville, offered a compromise version of his House Bill 32, agreeing to lower tax increases and a smaller revenue gain for the state budget. Originally, Miller’s bill would have raised $94 million over the next two years, but it’s not clear how that would have fared in the Republican-led General Assembly.
Health advocates had hoped for more, but they testified in favor of the compromise before the House budget committee. Raising taxes on tobacco products not only boosts state revenue, it discourages youths from buying those products, said Ben Chandler, president of the Foundation for a Healthy Kentucky.
“A significant tax bump reduces consumption,” Chandler told the lawmakers.
Vaping — using an electronic cigarette to inhale concentrated nicotine vapor — has become common in recent years in Kentucky’s middle schools and high schools, Chandler said.
“These kids are as young as 11 and 12 years old,” said Chandler, a former congressman from Central Kentucky. “And they are experimenting with a product containing high levels of nicotine and made in such a way that it can hook them almost overnight, subjecting them to a lifelong addiction that is among the most difficult addictions on Earth to break.”
The bill will advance to the full House.
In his budget proposal, Democratic Gov. Andy Beshear recommended a 10-cent increase in the tax on cigarettes and other tobacco products and a new 10-cent-per-milliliter tax on vaping liquid, to raise an estimated $57 million over the next two years. Miller’s bill would not affect cigarettes, and rather than tax liquid nicotine, it would levy a wholesale tax on all vaping products.
Presently, the only tax on vaping products is the 6 percent sales tax on most retail goods. Miller’s bill would add vaping-related items to the list of “other tobacco products” in state law, subjecting them to related taxes in the future. The wholesale tax on these products would rise from the current 15 percent to 25 percent.
Miller said he is sponsoring a companion measure, House Bill 69, that would regulate the sale of vaping products in Kentucky. That bill is set to be heard Wednesday in the House Licensing and Occupations Committee. It would ban online purchases of most vaping products and require the Kentucky Department of Alcoholic Beverage Control to oversee the licensing of stores where those products could be sold only to adults.
Vape shop representatives told the House committee on Tuesday that they support Miller’s tougher regulations but oppose his tax increases. Vape shops sell a legal product to adults who want to quit smoking cigarettes, said Jason Underwood of the Kentucky Smoke Free Association, which represents about 400 stores statewide.
“That tax would put us out of whack with some of our surrounding states,” Underwood said.
Underwood cited a December study by the National Bureau of Economic Research that suggested higher vaping taxes could lead to more cigarette smoking. The study looked at Minnesota, which imposed a 95 percent tax on electronic cigarettes — several times higher than what Miller is proposing for Kentucky — and it concluded that 32,400 additional adult smokers would have quit smoking in Minnesota without the tax.
Troy LeBlanc, a Louisville vape shop owner, told the House panel that the tax hike would harm hundreds of small stores like his while barely denting the bottom line of e-cigarette giant Juul or the grocery and gas station chains where most youths buy their vaping supplies.
“The bottom line is, the people here are Mom and Pop stores that are truly here to try and help people. We’re not here to try and addict a new generation,” LeBlanc said, gesturing at the assembled store owners. “We’re here to help people quit smoking. We ask that you reconsider this tax, because it’s going to do nothing but hurt them and increase the money in the pockets of companies like Juul, who can absorb a 25 percent tax easily.”
