Taxing e-cigarettes floated to help budget, but details hazy

Just the idea of it ticks off Ian Williams.

Taxing e-cigarettes? That’s just greedy.

But it is exactly what the senator in charge of generating new revenue to fill the state’s budget hole is thinking of doing.

Sen. Les Donovan, R-Wichita, who chairs the Senate Taxation Committee, has few specifics and no potential tax rates in mind. Just the idea, however, has Williams — who works at Juicy’s Vapor near 21st and Gage — on edge.

“In my opinion, it’s just greed. It’s trying to get their hands on more money. I mean, why would they put a tax on it?” Williams said. “Why put a tax on this?”

A gap of about $800 million between revenue and expenditures has lawmakers groping for solutions, however. Even taking into account expected fund transfers and other measures, the Legislature still needs to find about $400 million in either spending cuts or new revenue.

With a hole that big, taxing a product like e-cigarettes begins to look more appealing.

E-cigarettes use battery power to vaporize liquid nicotine that the user then inhales like a cigarette. Their use and popularity have risen rapidly over the past few years.

Donovan, who floated the idea during meetings of the Senate Taxation Committee this week, suggested e-cigarettes, if taxed, shouldn’t be taxed at the level of traditional cigarettes. Right now, e-cigarettes are only subject to the state sales tax applied to all products.

“Much safer, probably, we don’t know for sure — much healthier, less unhealthy than smoking tobacco cigarettes,” Donovan said. “So we want to try to keep the tax, in my mind, we want to try to keep that tax lower, significantly lower than the same equivalent tax on a pack of cigarettes.”

Kansas currently imposes a 79-cent per-pack tax on cigarettes, the 35th highest in the country. Gov. Sam Brownback has proposed hiking the rate by $1.50, to $2.29 per pack. That would give the state the 11th-highest rate in the country. It also would dramatically increase the gap between Kansas’ rate and neighboring Missouri, which collects only 17 cents per pack.

So far lawmakers have shown little appetite for raising tobacco taxes, but any hike could have implications for a potential e-cigarette tax. According to Donovan, any e-cigarette tax should be significantly lower than the equivalent tax on a pack of regular cigarettes. Presumably, the higher the tax on traditional cigarettes, the higher the tax on e-cigarettes could be while still sticking to Donovan’s desire for a “significantly lower” rate.

But what exactly a tax on e-cigarettes would look like is unclear. Would the tax be applied to the nicotine, to the product itself, or to the so-called “eliquid” that replenishes the e-cigarette? Without knowing the answers, it is difficult to begin to estimate how much potential revenue a tax would generate.

A 2013 survey of adult tobacco use in Kansas conducted by The University of Kansas Medical Center found that 45 percent of cigarette smokers had tried e-cigarettes and 14 percent had used them in the past month. About 20 percent of adults in the state smoke.

The survey also found that adults who used only e-cigarettes are younger and more affluent than those who only smoke regular cigarettes.

As smokers move from regular cigarettes to e-cigarettes, states, including Kansas, will lose revenue, and that is really driving the idea of taxing the new nicotine product, Williams said.

“States lose money on big tobacco because people are quitting. They make money on big tobacco. So the less people buy, the less amount of cigarettes people buy, the less money each individual state gets,” Williams said.

Even though Donovan hasn’t released a plan on paper, at least not publicly, he would face guaranteed opposition from industry groups and associations. Tom Palace, director of the Petroleum Marketers and Convenience Store Association of Kansas, said in an email his organization opposes the proposed tobacco tax increase and would oppose taxing e-cigarettes as well.

Sen. Tom Holland, D-Baldwin City, sits on the Senate Taxation Committee and is also not a fan. He said he is not interested in helping Republicans dig out of the state’s revenue crater until they own up to the failings of the 2012 tax law.

“I don’t want to tax anything because of the fiscal mess Gov. Brownback got us in,” Holland said.

For his part, Brownback isn’t taking a public position on e-cigarettes. Asked whether the governor would support an e-cigarette tax, spokeswoman Eileen Hawley said only that Brownback “is willing to carefully consider any legislation the legislature chooses to pass.”

Donovan said the more he looks at the issue of e-cigarettes, the more he considers tackling the issue next year. But there is revenue to be had, he said.

“That’s going to be a very, very fast-growing business,” Donovan said.

Developing a new tax on e-cigarettes would require lawmakers to wade into the ongoing debate within the health community over what approach to take to the relatively new devices.

E-cigarettes are thought to potentially be less harmful to health than traditional cigarettes. They don’t contain many of the same cancer-causing chemicals found in tobacco cigarettes.

Nevertheless, the medical community hasn’t coalesced around an answer to the question of whether e-cigarettes should be promoted as a way to quit tobacco cigarettes. All major medical organizations have called more research, however.

Questions have also been raised about product safety. Consumption of a concentrated amount of nicotine, such as what is found in a package of eliquid, which an e-cigarette turns into vapor, can prove particularly harmful.

According to slides prepared by former Kansas Department of Health and Environment secretary Robert Moser, in 2013 there were at least 24 cases of e-cigarette exposures in Kansas, with 11 involving children.

Even though the medical community so far hasn’t embraced e-cigarettes, Williams’ customers at Juicy’s Vapor have.

“People tell me all the time how much better they feel, even after a couple weeks, a couple months. They’ll be sitting at home and they don’t hear themselves breathing anymore. They’re not labored breathing anymore. They smell better,” Williams said.

“People notice a change in their lives. They’re happier.”

Jonathan Shorman can be reached at (785) 295-5619 or jonathan.shorman@cjonline.com.

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