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E-cigarettes fire up tax, regulatory melee

Chicago, some suburbs and Illinois are among the country’s most aggressive players when it comes to regulating and taxing e-cigarettes and related products. | AP file photo

Alex Sistowicz started smoking as a high school sophomore and says he got used to “waking up having to cough up a lung, all this nasty stuff, and my room always had that sooty ash smell.”

Two years ago he switched to “vaping” — inhaling nicotine-laced, flavored vapor from a battery-powered device. Simple ones are known as e-cigarettes; more complicated ones may be called vaping “mods” (for modular) or other names.

“It’s like night and day,” said Sistowicz, 22, a sales associate at the Lake View shop Smoque, which specializes in selling vaping devices and custom flavored liquids for them. “Now I’m not coughing, and my room just smells like candles.”

Use of e-cigarettes and vaping products that deliver nicotine without combustion are becoming a nationwide phenomenon, with a Reuters/Ipsos poll showing that 10 percent of Americans now “vape.” That’s a fourfold increase from government estimates in 2013, Reuters noted.

In recent years, the number of dedicated “vape” shops has zoomed from zero to an industry estimate of 15,000 nationwide; and e-cigarettes and other products are also sold in over 100,000 convenience stores and other retail outlets, racking up over $3 billion in 2015 sales.

State and local lawmakers are taking notice: Chicago, a growing number of Cook County suburbs and the state of Illinois are among the country’s most aggressive players when it comes to regulating and taxing e-cigarettes and related products.

Often, these governments go after them as if they were traditional tobacco brands. Such forcefulness is getting pushback from e-cigarette marketers, including some international cigarette behemoths, who promote their products as a healthy alternative to traditional smoking.

“Given that it’s a really rapidly evolving and rapidly growing market, whatever governments do now will have a big impact,” said Frank Chaloupka, an economist and principal investigator of Tobacconomics, a University of Illinois at Chicago Health Policy Center project that uses economics to inform policy meant to reduce tobacco use.

Chicago includes e-cigarettes and vaping in its clean air ordinance, meaning the products cannot be used in public buildings including restaurants and bars, with just a few exceptions for tobacco shops and theater performances.

And the medical community is rallying around Mayor Rahm Emanuel’s proposal to raise the minimum age for purchasing e-cigarettes and tobacco products to 21 from 18 years old. Recently, the Illinois State Medical Society came out in favor of the proposed change. Vaping marketers oppose raising the age requirement, arguing it will depress sales.

Moreover, Chicago passed a tax on the products as part of the 2016 budget, levying 80 cents per e-cigarette and 55 cents per milliliter of fluid used to refill devices. The tax is expected to raise at least $1 million a year, a small sliver of the $755 million in new taxes added to the budget.

Cook County’s most recent budget also added a tax of 20 cents per milliliter on the refill fluid.

There are more than 100 vape shops in the Chicago area, and the owners and employees are outraged at the growing city taxes and worried about how taxes and regulations will affect their business.

Illinois banned the sale of e-cigarettes and vaping products to minors effective January 2014.

Lead sponsor state Rep. Kathleen Willis, D-Addison, said she plans to introduce a bill that would fix what she described as a “small loophole” in that law, by prohibiting minors from possessing the products.

Another bill co-sponsored by Willis that took effect in January 2015 mandates e-cigarettes and refillable liquid be sold in special childproof packaging.

Willis also plans to reintroduce a bill that stalled in the Legislature last year, which would add vaping products and e-cigarettes to the existing Smoke Free Illinois Act, banning them in almost all public places including schools, businesses, sports arenas, restaurants and bars. Already, e-cigarettes are banned on the campuses of Illinois state colleges and universities, including in parking lots and on the grounds.

Willis said lawmakers have also discussed proposing a state tax on the products, and a bill could be introduced this year. Only a few states including Minnesota and North Carolina currently have excise taxes on e-cigarettes, though various other states have proposed them.

Along with Chicago, nine other municipalities — Wilmette, Evanston, Oak Park, Skokie, Schaumburg, Naperville, Elk Grove Village, DeKalb and Deerfield — ban e-cigarettes in workplaces, restaurants and bars, according to the American Non-Smokers’ Rights Foundation, a national group that lobbies against smoking and secondhand smoke. And at least 34 states restrict sales of the products to youth.

State, county and municipal action has so far been the way to address the burgeoning industry, since the Food and Drug Administration has not yet implemented rules or officially designated e-cigarettes and vaping implements as tobacco products.

Willis said state legislators had intended to wait for FDA guidance before adding e-cigarettes to the state smoke free law.

“But we could be waiting forever, ” she said. “We’re trying to take everyone’s thoughts and considerations into account but we’re finding a lot of towns coming up with their own bans on indoor vaping so it’s time to do something statewide.”

Many health experts say e-cigarettes and vaping pose lower health risks than traditional cigarettes, but vaping isn’t risk-free.

The vapor is known to contain carcinogens and is likely to have other effects on the respiratory system, according to studies cited in a white paper by the Respiratory Health Association, a Chicago-based advocacy and research group.

Critics complain that the products are blatantly marketed to young people, with catchy packaging and flavors including chocolate, cherry, cotton candy and bubble gum.

“We’ve made great strides in terms of cutting tobacco use, especially youth cigarette use, especially here in Chicago where we’re at record lows,” said Matt Maloney, director of health policy for the Respiratory Health Association. “I’d hate to see the cycle of addiction starting up again because of this relatively new product.”

Recently, City Hall launched a social media educational campaign to reduce and prevent youth vaping.

Ald. Joe “Proco” Moreno (1st), who took the lead pushing for the tax in the Chicago budget, noted “there is some evidence that folks can use this to wean themselves off traditional cigarettes.

“We thought about that very hard in terms of the tax,” he continued. “But youth are gravitating toward them, we don’t want this to be the new norm. One weapon we have against this is taxes.”

Kari Lydersen is a BGA contributor.