40% tax implemented in Pennsylvania lead to mass closure of shops across the state, many fear worse for industry in Connecticut.
Connecticut Governor, Dannel Malloy, released his “compromise” budget proposal last week. The Democrat Governor has been historically unpopular over his six years in office, and already announced he would not seek reelection in 2018. But in spite of this, Connecticut does face some severe and complicated financial issues right now. As such, Gov. Malloy is urging legislators to pass his latest attempt at state budget that could begin closing their deficits. If passed, the tax would take effect next January and the results could prove catastrophic for not only the vaping industry, but the state itself.
Pennsylvania’s 2016 Vape Tax
In late 2016 PA. passed a 40% wholesale tax on all vaping products. Also facing some tough budgetary challenges, legislators were able to generate 13.7 million in additional funds without having to raise state income or sales tax. But the vaping industry at large in Pennsylvania took a huge hit, with over 100 vape shops closing; That’s a full quarter of the total. Although lobbying for some alternative taxation methods has been undertaken, there is little that would suggest lawmakers move forward on these compromises until their hand is forced. This is simply because the tax has so far been successful from the state’s perspective. But the more Pennsylvania vapers that move online to shop for their supplies, the more stores that will inevitably close, and along with it a steady decline in the tax revenue for the state.
Consequences for Connecticut
If this budget is passed, it would spell almost immediate disaster for many of the family owned, small vape shops across the state. Wholesale taxes of this magnitude would likely deter customers away from brick and mortar shops enough to immediately force closures of any struggling shops, as seen in PA. What’s worse is unlike Pennsylvania, in which larger shops have been able to mitigate the tax to a degree, a 75% tax would have major consequences and likely close all but the most expensive, niche, or busy shops across the state. At which point tax revenues would be, at best, a fraction of what’s projected by lawmakers now. House Speaker in Connecticut, D-Joe Aresimowicz, shares this concern, “Given some of our commerce laws currently…the internet is a body unto itself. If you make a product that is just not affordable locally or they can get it substantially cheaper on the internet, that’s what will happen… We can’t find ourselves in another situation where we banked on revenues coming into the state of Connecticut that evaporated and finding ourselves in another deficit six, eight months from now.’’
Ultimately though, this is a public health issue and the passage of this tax, regardless of politics, will have a negative impact on the health of smokers across the state of Connecticut. Firstly, given the misinformation about the dangers of vaping, such a dramatic rise in cost will only give those considering the switch another reason to stick with an extremely dangerous option. Not only that, but many of those who already made the switch may view the exorbitant tax as a good enough reason to go back to traditional cigarettes. A Harvard poll found that most people surveyed didn’t actually believe vaping was any safer than smoking cigarettes. These factors will only slow, or even reverse, the decline in smoking rates that we have built over the last 50 plus years.
What do you think about the proposed tax? Do you think that even Pennsylvania’s 40% tax is too high? Do you think that taxes make it even less likely people will switch to vaping? Let us know in the comments.