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Local Lawmakers Left Red Faced After Failure Of E-Cigarette Tax

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Guy Bentley Research Associate, Reason Foundation
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A county’s experiment in e-cigarette taxes has resulted in a massive failure, with the amount of money the Council expected to raise falling short by 75-85 percent.

Maryland’s Montgomery Council passed 30 percent tax on the wholesale price of e-cigarettes in May 2015. “I’m very proud that Montgomery County is in the forefront of national policy in this area,” said the bill’s chief sponsor and council member Tom Hucker (D-East County).

The Council expected to collect a cool $1.5 million to $2.5 million per year. Hucker made several wild claims in support of the bill on Twitter, arguing not taxing e-cigarettes was equivalent to subsidizing them and that a tax would provide much-needed revenue for schools.

But the latest figures on how much revenue the tax has actually raised will be a bitter blow for the bill’s supporters. As of Feb. 29, the tax had raised just $175,720 — roughly 80 percent short of what officials said it would raise.

“Adults who quit smoking using vapor products are no longer paying cigarette taxes.  For those who are reliant on that tax revenue, smokers quitting isn’t something to celebrate,” said President of the American Vaping Association, Gregory Conley in a statement to The Daily Caller News Foundation.

“The County Commission’s desire for more tax revenue came together with a lack of drive on the part of the sponsors to actually study the market they were targeting. These combined forces resulted in a revenue estimate that was wildly overestimated. The budget hole created by this tax underperforming will likely leave Montgomery County residents on the hook come tax time.”

The number of states that considered levying e-cigarette taxes exploded in 2015. A Tax Foundation report released March 22 showed that as of Jan 1 four states, the District of Columbia and three local jurisdictions have imposed taxes on vapor products.

E-cigarette taxes have been criticized by policy experts as a danger to public health as they may discourage smokers from switching from tobacco to vaping, which is far safer. (RELATED: Study: E-cigarettes Are 95% Safer Than Tobacco)

Competitive Enterprise Institute Fellow Michelle Minton was a strong critic of a Utah bill that would’ve slapped an 86 percent tax on e-cigarettes and raise the vaping age to 21.

“Adult human beings walking around the world between the ages of 18 and 21 who are currently addicted to traditional cigarettes and could make the switch over to electronic cigarettes,” Minton told TheDCNF in February.

“They are trying to legally block that path, not by making it more expensive, but just preventing them from using this option. It boggles the mind that they would do this to adult citizens trying to quit smoking.”

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