Amid all of the hubbub surrounding the presidential election, two largely overlooked propositions were on the ballots in California and North Dakota which could have major repercussions for the national vaping industry.
Voters Raised the Tax on E-Liquids and E-Cigarettes in California
Proposition 56 in California proposed raising the taxes on tobacco cigarettes by $2 a pack. Also included in the language of the bill was a tax of nearly 67% that would affect the purchase of e-liquid containing nicotine or items containing e-liquid with nicotine in addition to traditional nicotine products.
Vaping industry manufacturers and vape product sellers were closely watching Proposition 56, since a ‘yes’ vote probably means that other states will soon follow with similar legislation. Tobacco-related tax raises on e-liquid and e-cigarettes would mean suppressed sales for the industry in each state that votes to raise them.
Results from the November 8 election show that Proposition 56 passed in California, with nearly 63% of voters voting to increase those taxes. Proposition 56 is the first tobacco tax imposed upon vaping products in the country.
The tax is expected to raise $1.4 billion a year, with the funds slotted for health care, smoking prevention programs, and research. Medi-Cal is slated to receive the largest portion of the tax revenue, between $710 million and $1 billion, with schools receiving the next largest slice of the pie at $20 million. The University of California will receive 5% for medical research of tobacco-related diseases.
Increased Taxes on E-Liquids and Vaping Products Defeated in North Dakota
A similar measure in North Dakota, Initiated Statutory Measure 4, was defeated in Tuesday’s election. 61% of North Dakota voters rejected the measure in the ballot box. That measure would have also increased taxes on tobacco products and liquid nicotine products used for e-cigarettes.
Funds raised from that revenue would have gone towards veteran services and health services. North Dakota has the fourth lowest tax rate on tobacco products in the country, surpassed only by Georgia, Virginia, and Missouri.
What This Means for You
This is mixed news for the vaping industry. Tobacco companies spent an enormous amount of money to defeat both measures, but only North Dakota resisted the increase. The passage of Proposition 56 is bad news for manufacturers of e-liquids and e-cigarettes, since California tends to be a trending leader with legislation that is soon adopted by other states.
Despite increased regulations and taxes, the vape industry continues to defy the odds and is growing at a rapid pace. Sales are expected to surpass $10 billion in 2017, which means the industry is thriving and growing.
In fact, a recent survey in New York City shows that younger millennials are more likely to choose e-cigarettes and vaping products over traditional tobacco products. Nationwide, more adults prefer vape products to tobacco. This trend is a prime reason why legislators are including e-liquids and e-cigarettes into the language of current tobacco tax laws. They expect the tax revenue from tobacco products to fall while revenue from vaping products is more likely to rise.
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