Ben Chandler, President and CEO
Foundation for a Healthy Kentucky
House Appropriations & Revenue Committee
February 11, 2020
Thank you, Rep. Miller, Chairman Rudy and members of the Committee. I am happy to testify on behalf of the Foundation for a Healthy Kentucky in support of HB32, which imposes an excise tax on e-cigarettes, or vaping products, as they are often called.
As you know, e-cigarettes are the only tobacco product sold in Kentucky that are not subject to an excise tax. The Foundation and more than 225 other members of our Coalition for a Smoke-Free Tomorrow in Kentucky support taxing e-cigs on par with cigarettes. We know that raising the price of tobacco products is one of these most effective measures for reducing tobacco use.
Some argue that tobacco taxes are a declining source of revenue. For most tobacco products, that is true. Yet the 50-cent-per-pack tax increase on cigarettes that was adopted by the General Assembly in 2018 raised $140 million in new revenue during its first year. And it will continue to generate tens of millions in additional revenues for years to come.
Here’s the most important fact about the cigarette tax increase from the Foundation’s perspective, however: At the same time the 50-cent increase raised new revenue, Kentuckians also bought 36 million fewer packs of cigarettes. That’s a significant health benefit for a declining revenue source, and it also will lead to reduced health care costs down the line.
Unlike traditional, combustible cigarettes, e-cigarettes represent a growing market. U.S. e-cig sales reached $3.6 billion in 2018, and are projected to climb to $15.6 billion by 2024.
Unfortunately, too much of e-cig sales growth to date has been among youth, and that’s the primary reason I am here today – because we are deeply concerned about data showing that youth tobacco use is escalating for the first time in decades, it’s escalating very rapidly, and the escalation is solely due to e-cigarettes.
In 2019, 26 percent of Kentucky high school students reported using e-cigarettes in the past month, nearly doubling the 2017 rate. Among middle schoolers, 17.3 percent vaped in 2019, more than quadrupling the 2017 rate of 3.9 percent.
These kids are as young as 11 and 12 years old, and they’re experimenting with a product containing high levels of nicotine and made in such a way that it can hook them almost overnight, subjecting them to a lifelong addiction that is among the most difficult addictions on earth to break.
The Centers for Disease Control and Prevention found that 99 percent of e-cigarettes contain nicotine; even some e-cigs marketed as zero-nicotine were found to contain this highly addictive chemical.
Using nicotine in adolescence rewires the brain, reducing attention span, hindering learning, and impeding impulse control. Youth vaping also increases the risk of smoking later on, as well as addiction to other drugs.
As I’ve testified, Kentucky’s recent experience with the cigarette tax increase shows that a significant tax bump reduces consumption. And the research shows that the reduction in tobacco use is most prevalent among youth, pregnant women and persons living on low incomes.
The Coalition for a Smoke-Free Tomorrow recommends that the General Assembly enact an e-cigarette tax that is equal to the tax on cigarettes, or 27.5 percent of the wholesale price. As we understand it, the committee substitute for HB32 would tax e-cigarettes at slightly below that amount – 25 percent of the wholesale price.
Although at least 21 states now tax e-cigarettes, these taxes are still relatively new. Thus, we don’t have specific, reliable estimates of how much youth e-cig use will go down as a result of either of these tax rates. That said, the general consensus of the research shows that a 10 percent increase in the real price of cigarettes reduces consumption by 3 to 5 percent. The higher the tax, the larger the tobacco use reduction.
The Foundation for a Healthy Kentucky believes that an excise tax of 25 percent of the wholesale price is close enough to the current tax on cigarettes, and would lead to a substantial enough price increase, to create a considerable reduction in youth vaping.
We can support this compromise, in part, because the General Assembly already passed a tobacco-free schools bill in 2019, and because a new federal law raises the minimum legal age for tobacco purchases to 21. We believe the combination of these measures create a strong start for reducing youth vaping in the Commonwealth.
The Foundation also supports increasing the public health budget for tobacco use prevention and cessation, and banning flavored e-cigarettes. But those are topics for another day this year.
Meanwhile – Kentucky and the nation – did not get into the youth vaping epidemic overnight. And we won’t reverse it overnight either. The Foundation will continue to monitor the data on youth e-cigarette use very closely. And you can rely on my promise that we will be back again next session with another recommended tax increase should we not see a 180-degree turn in youth e-cigarette use in Kentucky.
Thank you. I am happy to take your questions.
ii. “E-cigarette Market 2019 Research,” 360 Research Reports, https://www.theexpresswire.com/pressrelease/E-cigarette-Market-2019-to-2024-With-Top-Countries-Data-Opportunities-Industry-Trends-and-Policies-by-Regions-and-Companies_10439201
iii. 2019 Youth Risk Behavior Survey, https://education.ky.gov/curriculum/CSH/data/Pages/Youth-Risk-Behavior-Survey-(YRBS).aspx
iv. 2019 Youth Risk Behavior Survey, https://education.ky.gov/curriculum/CSH/data/Pages/Youth-Risk-Behavior-Survey-(YRBS).aspx
v. Quick Facts on the Risk of E-cigarettes for Kids, Teens, and Young Adults https://www.cdc.gov/tobacco/basic_information/e-cigarettes/Quick-Facts-on-the-Risks-of-E-cigarettes-for-Kids-Teens-and-Young-Adults.html
vi. Quick Facts on the Risk of E-cigarettes for Kids, Teens, and Young Adults https://www.cdc.gov/tobacco/basic_information/e-cigarettes/Quick-Facts-on-the-Risks-of-E-cigarettes-for-Kids-Teens-and-Young-Adults.html
viii. “STATE EXCISE TAX RATES FOR NON-CIGARETTE TOBACCO PRODUCTS,” Campaign for Tobacco-Free Kids, January 14, 2020, https://www.tobaccofreekids.org/assets/factsheets/0169.pdf
ix. RAISING CIGARETTE TAXES REDUCES SMOKING, ESPECIALLY AMONG KIDS
(AND THE CIGARETTE COMPANIES KNOW IT), Campaign for Tobacco-Free Kids, June 28, 2019, https://www.tobaccofreekids.org/assets/factsheets/0146.pdf