Is the electronic cigarette market being milked by the US authorities?

As the number of US state authorities looking to introduce electronic cigarette taxes continues to grow, many people are now starting to ask the question, is the electronic cigarette market being milked by the US authorities?

This is a valid question when you bear in mind the ongoing reduction in tobacco tax income, budget difficulties at federal level and the growing popularity of electronic cigarettes. Indeed a research note just a few days ago suggested that the current US market is worth around $1.5 billion per annum although electronic cigarette sales could rise to in excess of $4 billion per annum by 2018. Would this be a perfect opportunity for the authorities to smash and grab lost tobacco tax income?

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Replacing tobacco tax income

Whether we like it or not, many governments and state authorities around the world have become dependent upon tobacco taxes. Initially they were introduced as a means of paying for additional “health care services” required by those developing an array of medical conditions connected with tobacco cigarette smoking. Slowly but surely a large percentage of these tobacco tax funds were used to shore up other budgets across the public services sector. We are talking about trillions upon trillions of dollars in tax income which is potentially at risk in the short, medium and longer term.

There is a growing belief that electronic cigarette use will surpass that of its tobacco counterpart in the US within 10 years. This would see a massive reduction in tax income unless further income streams can be created and milked in the future.

Is the healthcare cost argument still valid?

At this moment in time a number of federal and state authorities around the world are still suggesting that there are significant health implications with regards to electronic cigarettes. This is despite the fact that there is no firm evidence available at the moment from the array of medical trials and research programs undertaken. However, the authorities are very subtly linking electronic cigarettes and tobacco cigarettes as “one” in the minds of the general public.

A number of prominent medical experts have come out in favour of electronic cigarettes with one even suggesting they were possibly the greatest opportunity to rid the world of tobacco addiction. It is fair to say that not all medical experts are in favour of electronic cigarettes to such an extent! However, if only a fraction of the possible health cost savings could be implemented then surely the sale of electronic cigarettes would be far more beneficial than heavy taxation – which would reduce the number of people using them.

A difficult quandary

The electronic cigarette quandary is very similar to that facing the electric car market which is a major long-term threat to the petroleum/gasoline powered vehicle industry. Initially governments and states around the world were very keen to promote the electric car market, even offering significant financial assistance, but there is a suspicion that eventually electric cars will be taxed a lot heavier than they are at the moment.

The reality is that governments around the world have seen their budgets come under pressure, costs rise and the financial crisis of 2007/8 will have repercussions for many years to come. Upon detailed investigation the potential health care cost savings, associated with electronic cigarettes over their tobacco cigarette counterparts, would seem to be greater than any short, medium and long-term tax income. However, is this really an argument which the authorities will take on board?

Mark Benson


Mark Benson is a contributing author for Spinfuel eMagazine. His continuing columns will bring a levelheaded approach to the dynamics involved in realizing a positive future for the e-cigarette industry. For more information on OK Eliquids and other products available please visit the OKCigs website.