The Tobacco Tax Equity Act of 2019 would establish first federal e-cigarette tax, increase tobacco tax rate & close tax loopholes

WASHINGTON—U.S Senate Democratic Whip Dick Durbin (D- IL) and U.S. Senators Sherrod Brown (D-OH), Jack Reed (D-RI), Richard Blumenthal (D-CT), Ed Markey (D-MA), Ron Wyden (D-OR), Mazie Hirono (D-HI), Patty Murray (D-WA), and Jeff Merkley (D-OR) today announced the Tobacco Tax Equity Act of 2019, which would help reduce youth tobacco use by closing loopholes in the tax code that have long been exploited by the tobacco industry to avoid regulation and taxes for their products.  This legislation would apply tax parity across all tobacco products, including establishing the first federal e-cigarettes tax and increasing the tobacco tax rate for the first time in a decade.  According to public health experts, increasing the price of tobacco products is the single most effective way to reduce tobacco use, especially among youth. 

“For years, I have been sounding the alarm that the vaping industry is following Big Tobacco’s playbook on targeting kids,” said Durbin. “I’ve learned that the most effective tool to prevent children from starting this insidious habit is to price it out of their range.  This bill would do that, and help reduce tobacco and e-cigarette use by ending loopholes that the industry has exploited to target our children.” 

"American taxpayers shouldn't be footing the bill for Big Tobacco’s tax breaks, while working families are working harder and harder to get by,” said Brown.

“Big Tobacco is relying on old regulatory loopholes to avoid paying taxes and encourage the use of their new lethal products. This legislation will close a gaping tax loophole and address the critical need to prevent young people from beginning a deadly addiction,” said Blumenthal.

“Big Tobacco continues to take advantage of existing tax loopholes – evading oversight, dodging taxes, and eluding any accountability – all at the expense of taxpayer pocketbooks and public health. With youth e-cigarette use continuing to rise at alarming rates, it is time that we enforce the same federal tax rate for all tobacco products across the industry. This legislation would bring a level of accountability to the tobacco industry for the generations of harm it imposed on American families,” said Markey

“Highly-addictive e-cigarettes are getting into the hands of more and more young people, exposing them to dangerous chemicals like formaldehyde. These products provide an on-ramp for young people to start smoking tobacco cigarettes. A new generation of nicotine users has been created virtually overnight, and the companies making billions are downplaying the health risks. I’ve seen this before—it’s the same playbook the tobacco companies ran for decades. To combat this growing public health threat, e-cigarettes must be taxed like tobacco cigarettes,” said Wyden.

“Public health experts agree that increasing the price of tobacco products is the most effective way to reduce tobacco use,” Hirono said. “The need for this legislation is urgent. We are facing a growing epidemic of e-cigarette use among young people in our country that threatens to reverse the progress our we’ve made on curbing tobacco use. And in Hawaii, youth are using e-cigarettes at double the national rate. The Tobacco Tax Parity Act of 2019 will save lives and I urge all my colleagues to support it.”

“At a time when we’re still learning more about the harmful and even deadly impacts of electronic cigarette use, it is more important than ever that we do what we can to dissuade youth and others from taking up habits that undermine their health,” said Murray. “I’m proud to join Senator Durbin in introducing the Tobacco Tax Equity Act, and will continue working with my colleagues to reverse this alarming trend and protect children and families from the potentially fatal effects of e-cigarettes and other tobacco products.”

“It’s brazenly clear that candy and fruit flavored e-cigarettes are designed to target children and get them hooked on nicotine products at a young age,” said Merkley.“Since these products have hit the market, teen nicotine addiction and cases of youth lung disease have skyrocketed. Congress has an urgent responsibility to act, and a key move is to apply the same taxes to e-cigarettes that apply to other tobacco products. This is an important first step while we work to permanently ban flavors and refillable cartridges.”

The Tobacco Tax Equity Act of 2019 would close tax code loopholes for tobacco products by doubling the federal tax rate on cigarettes, pegging it to inflation, and setting the federal tax rate for all other tobacco products—including e-cigarettes—at this same level. Under current law, the federal tax rate for small cigars and roll-your-own (RYO) cigarettes is at the same level as cigarettes. However, e-cigarettes, large cigars, smokeless tobacco, and pipe tobacco have a dramatically lower rate, at a time when their use – especially among youth – is trending at comparable rates to cigarettes. And while 17 states have imposed taxes on e-cigarettes—the most popular tobacco product among youth—there is no federal tax on this product.  The current tax code has numerous tax and regulatory loopholes the tobacco industry has exploited by shifting production and sale schemes to avoid taxes and oversight, resulting in nearly $4 billion in lost federal revenue between 2009 and 2014.

Tobacco is the leading cause of preventable and premature death, annually accounting for 480,000 deaths—or one out of every five deaths—in America. Tobacco use costs more than $300 billion a year, including $170 billion in direct medical care for adults, 60 percent of which is paid through government programs such as Medicare and Medicaid, and more than $156 billion in lost productivity.  

According to the most recent public health data from CDC, America has seen a 32 percent increase over the last year alone in the number of high-school children using e-cigarettes – with five million teens currently vaping.  This alarming increase comes on top of a 78 percent increase in the number of high-school children using e-cigarettes between 2017 and 2018, and a 48 percent increase in the number of middle-school children using these addictive and dangerous products during that time.

The Tobacco Tax Equity Act of 2019 is endorsed by the Campaign for Tobacco-Free Kids, the March of Dimes, the American Lung Association, the American Heart Association, the American Cancer Society Cancer Action Network, the American Public Health Association, the National Association of County and City Health Officials, Trust for America’s Health, and the American Thoracic Society.

“The Campaign for Tobacco-Free Kids strongly supports Sen. Durbin’s legislation to double the cigarette tax and tax other tobacco products at equivalent rates,” said Matthew L. Myers, President of the Campaign for Tobacco-Free Kids. “The evidence is clear that raising the price of tobacco products is one of the most effective ways to reduce tobacco use, especially among kids. Sen. Durbin’s bill will continue to drive down youth smoking rates, while preventing tobacco companies from using cheaper prices to lure kids to other tobacco products. It will also close tax loopholes that have cost the government revenue.”

“In response to the epidemic of youth e-cigarette use in our nation, we need bold action from our leaders to address this public health crisis. The Tobacco Tax Equity Act of 2019 is an important step in the right direction that would increase taxes on cigarettes, which is proven to reduce cigarette consumption. The bill would also tax e-cigarettes on par with traditional cigarettes, unless these tobacco products are authorized by FDA and regulated as modified-risk products. We are grateful to Senators Durbin, Brown, Markey, Blumenthal, and Reed for their work towards the endgame of tobacco use and nicotine addiction,” said Nancy Brown, CEO of the American Heart Association.

“Tobacco taxes are a proven method to prevent and reduce tobacco use, particularly among youth. We are grateful that Senator Durbin is continuing his longstanding commitment to raise the federal cigarette tax and to tax all other tobacco products at a comparable level, including e-cigarettes which are not currently subject to a federal tax. Increasing the cost of all tobacco products will be a valuable contribution to curbing the current youth tobacco use epidemic. We appreciate Sen. Durbin’s leadership and look forward to working with him to improve the health of the nation,” said Lisa Lacasse, president of the American Cancer Society Cancer Action Network (ACS CAN)

“The American Lung Association strongly supports Senator Durbin’s Tobacco Tax Parity Act.  This legislation will end the loophole on tobacco taxes and for the first time, tax e-cigarettes, the most commonly used tobacco product among youth.  Tobacco taxes are proven to reduce youth tobacco use, including e-cigarettes. This bill comes at a critical time, as our nation is facing both a youth e-cigarette epidemic and a public health emergency surrounding vaping-related illnesses and deaths.  We look forward to working with Senator Durbin to ensure this legislation becomes law,” said American Lung Association National President and CEO Harold P. Wimmer.

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