#NCGA: House GOP’s anti-tax cred up in smoke with e-cigarette vote

legislatureThere was a time when the GOP was recognized as the group who would cut your taxes, shrink government, and back the bureaucracy off of your case.  Well, it’s funny how things change when you finally get to be in charge of the public cash box.  

This past week, the GOP-controlled state House approved an excise tax on the sale of e-cigarettes, a relatively-new innovation growing in popularity with people trying to wean themselves from traditional cigarettes.   Defenders of the move point to the fact that the tax only impacts a small group of people, and that the tax itself is small.  The income tax and the gasoline tax started off small, too. 

The e-cig tax was included in omnibus tax legislation that also included language about local privilege license fees.   State Rep. Chris Millis (R-Pender) was one of only three Republicans to oppose these tax measures:

[…] After much consideration, I could not put the vote of the citizens of the 16th District behind establishing a brand new excise tax on a product which, as discussed on the House Floor, is unknown to impose harm to the public. In addition, I could not support furthering the capability of local governments of levying a “privilege license fee” on the backs of the very citizens doing business and providing opportunities for prosperity in their very jurisdiction.paytax

My vote was not because I desired higher excise tax on electronic cigarettes, but because I believe at this time that no such tax is warranted above and beyond the current sales tax. My vote against House Bill 1050 was not because I desired a higher privilege license fee, but because I believe that no privilege license fee is warranted and should be phased out over time by the State. It is my strong belief that the perspective should be that it is a privilege for local governments to have a business in their jurisdiction, not that a business is privileged to be the presence of a local government. It is my strong opinion that in this day in time the reason for a privilege license fee is archaic and unnecessary. […]

Wow.  This guy gets it.  

Roy Cordato, with Raleigh’s John Locke Foundation, also tossed in his two cents on the e-cig excise tax vote: 

The price of sound tax policy is eternal vigilance, and a year after the N.C. General Assembly implemented a tax reform plan based on sound principles of taxation and economics, it is threatening to begin the process of unraveling these reforms with a new excise tax on e-cigarettes.XGR02-NE-072413-RTW

The proposal, if passed, would place a 5-cent tax on each milliliter of liquid nicotine solution, which is used in e-cigarette cartridges. The proposal is being considered under the shroud of an omnibus tax bill that passed the N.C. House last week before moving over to the Senate for consideration.

No matter how you slice it, this is bad tax policy. It runs counter to basic principles of economic efficiency, individual liberty, and social equity. Furthermore, the legislative process being used to push it through is anything but transparent.


Current tax policy with respect to the sale of e-cigarettes gets it right. They are taxed at the same state and local sales tax rates that apply to other consumer goods throughout the economy. […]

Since the e-cigarette tax is projected to generate a trivial $5 million in new revenues, it is unlikely that this proposal is primarily about the money.This suggests that, for reasons I will not speculate about here, its primary purpose is to discourage the use of e-cigarettes. In other words, it is a deliberate attempt to use the state’s taxing authority to thwart free decision-making.

This should, at the very least, make most Republicans uncomfortable. As specifically noted in the North Carolina Republican Party platform, “Government should tax only to raise money for its essential functions. Government should not use the tax system to control our behavior, steer our choices, or change the way we live our lives.” It is unfortunate that many in the Republican majority who ran on this platform are now ignoring it.

And then there’s the issue of equity. Even though the amount is small, most of the $5 million in revenue is likely to come from those who can least afford it. While demographic information on e-cigarette smokers is not available, the vast majority of them are also smokers of traditional tobacco cigarettes. And, according to the Centers for Disease Control, while about 18 percent of the total adult population smokes, 28 percent of those living below the poverty line smoke. […]

Finally, the way in which this new tax is being pushed through the legislature lacks all transparency. It is a brand new, permanent tax that, going forward, will be very easy to increase, given that those who pay the tax are politically weak and unorganized. Yet it is being passed under the cover of an omnibus piece of legislation with no real debate. This kind of process might be acceptable for adjustments or tweaks to existing laws but not for the adoption of an entirely new class of taxation, with no existing infrastructure for collection.

Furthermore, there is almost nowhere to look for examples of the impact of such a tax on the industry, as every other state but one that has considered adopting an e-cigarette tax has rejected the idea.[…]

NC House Republicans have taken a step that not even liberal Massachusetts Democrats could take. Also, this e-cig excise tax idea was highly favored by the tobacco industry.  (And those folks dump a lot of dollars into reelection campaign funds.)