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E-Cigarettes Bring Heavy Breathing to Statehouse – House D Tax Proposal Would Nearly Double the Cost

New Thing in Nicotine Weans People From Smoking – Yet House Would Impose Punitive 75 Percent Tobacco Tax in Name of Health

They're not smoking, they're "vaping."

They’re not smoking, they’re “vaping.”

OLYMPIA, March 6.—If you’re going to be around the Capitol sundial Saturday at noon, you’re going to see what promises to be one of the most amazing spectacles ever witnessed at a statehouse protest – a angry crowd that literally fumes.

Merchants and users of electronic cigarettes are hoping for a throng a thousand strong. They’ll be blowing some the Legislature’s way. But there won’t be a cough in a carload – because it’s not smoke, it’s vapor. Right now lawmakers are considering a proposal that would impose such high taxes on the burgeoning e-cigarette trade that it might well snuff the biz. Advocates say a cigarette is a cigarette, and it ought to be taxed like one. Frustrated “vapers” say the Legislature doesn’t have a clue.

“It’s not even close to a cigarette,” says Shaun d’Sylva, owner of Bubba’s Vape Shop in Battleground and Vancouver, and one of the organizers of the protest. “We need to make sure they are aware of that, because they are talking about passing a bill that would absolutely devastate this industry.”

It is one of the most delightful statehouse quandaries in ages. For years lawmakers have been heaping tax after tax on cigarettes with the idea that the higher the price, the fewer people will smoke. Now comes an invention that looks like a cigarette, tastes like a cigarette, delivers nicotine like a cigarette – and isn’t. So far there is no evidence that e-cigarettes are harmful to health, aside from the gut-level conviction that anything with nicotine must be bad for you. But it is more likely that the opposite is true, as smokers make the switch from rather-more-deadly cigs. A bustling trade has emerged as suppliers and shopkeepers serve a fast-growing clientele that already numbers in the tens of thousands. But now some lawmakers say the state’s tobacco taxes ought to apply – even though there isn’t any tobacco involved.

“Nicotine is a killer, tobacco is a killer,” says House Finance Chair Reuven Carlyle, D-Seattle. “There’s no question that we need more information, but we also need to acknowledge that this is a nicotine delivery system.”

Sign of public interest: House hearing room is packed.

Sign of public interest: House hearing room is packed.

Thus comes a proposal to impose a punitive 75 percent tax on the business – a tax that appears aimed at stifling the trade by nearly doubling the cost. The Department of Revenue estimates sales would plummet 25 percent. But you might wonder if it is really about the money. The state stands to lose big bucks as the market shifts to what appears to be a safer alternative. The House Democrats’ current budget proposal is built on the tax; by 2017-19 it would generate some $60 million. Indeed, it may be the Legislature’s last chance to capture the tax money – the federal Food and Drug Administration is expected to decide sometime later this year whether e-cigarettes deserve the same government sanction as gum, patches and other stop-smoking cures, none of which are taxed in this state as tobacco products. Just as interesting is the fact that the legislative proposal seems to have touched a nerve, and has launched one of one of those grass-roots revolts that catches lawmakers off guard. Hundreds showed up for a hearing last week, on one day’s notice. You never want to come between a smoker and his or her smokes. Same goes for e-cigs. Ex-smokers say they’d rather fight than switch – back.

Tastes Good Like a Cigarette Should

State Rep. Dick Muri, R-Steilacoom.

State Rep. Dick Muri, R-Steilacoom.

The main thing e-cigarettes have in common with Camels and Marlboros and Chesterfields and other traditional cigarettes is the name. The “vaping” devices, on the market since 2004, use tiny batteries to vaporize capsules of liquid, often flavored and typically infused with nicotine. That makes them a far purer nicotine delivery device than cigarette smoke, which can contain 4,000 chemicals, many of them known carcinogens. At a crowded hearing of the House Finance Committee last Friday, a parade of store owners and reformed smokers declared that e-cigarettes have done what generations of multi-million-dollar government-sponsored anti-smoking campaigns have not. They have enabled thousands to kick the habit. Larry Stewart of the Washington Association of Neighborhood Stores said cigarette sales have been on a modest downward slope for years. But in 2012, as e-cigarettes began to capture market share, sales plummeted by a jaw-dropping nine percent. “We believe some of this decrease can be attributed to electronic cigarettes,” he said.

Certainly cost is a factor. There is a hefty upfront investment in equipment, to be sure, anywhere from $30 to $200. But a supply of “juice” equivalent to five packs of cigarettes might cost $8, compared to about $40 for ordinary smokes. State Rep. Dick Muri, R-Steilacoom, said he has trouble seeing the harm. Health concerns have never been enough, but if you give people a big cost incentive, they’ll stop smoking. As chairman of the Pierce County Board of Health in 2010, when e-cigarettes appeared on the market, he said he was suspicious at first. “I am a vehement anti-smoker, and my first thought was, what can we do to regulate them and ban all these people from bringing this stuff in. But the more that I learned about it, I’ve gone from being against them to thinking that we should promote them. These people are doing God’s work.”

What makes e-cigarettes different than all the other stop-smoking nostrums is that they mimic the hand-to-mouth motion involved in smoking at the same time that they deliver a kick. In time, many users graduate to juices that contain no nicotine at all. Stop-smoking success rates are a matter of debate, but at least week’s hearing merchants and users spoke with an almost religious fervor. Former smokers said they tried everything, but nothing worked like e-cigs. Many got into the business as a result. “If this tax had been on when I was going to convert to vaping, I never would have converted,” said Adam Brown, once a two-and-a-half-pack-a-day smoker and now a vapor seller. “I couldn’t have afforded it.”

Tickles the T-Zone

House Finance Chairman Reuven Carlyle, D-Seattle.

House Finance Chairman Reuven Carlyle, D-Seattle.

Here’s the problem. You might say, as the old Camel ads did, that e-cigarettes tickle the T-Zone. T for throat, T for taste. And T for taxes. Right now e-cigarette sellers pay the same taxes as merchants of any other ordinary retail merchandise – they pay sales taxes, together with business and occupations taxes on gross revenue. Carlyle maintains that if e-cigarettes are a tobacco substitute, with no evidence of harmlessness and no official sanction, then they ought to be taxed just like tobacco. “Parity for traditional cigarettes and nicotine delivery systems certainly makes sense,” Carlyle says.

Original proposals in the House and Senate would have imposed a 95 percent tax rate on e-cigarette equipment and supplies, the same rate that applies to snuff and chewing tobacco, effectively doubling the cost. Though the Republican-leaning Senate majority appears to have dispensed with the idea, the House Democrats are moving forward. An amended version of House Bill 2795 voted out of Carlyle’s committee this week reduced the rate to 75 percent, and offered an exemption if the FDA decides to regulate it as a prescription drug sold through pharmacies.

State Rep. Chris Reykdal, D-Olympia.

State Rep. Chris Reykdal, D-Olympia.

Lawmakers on both sides are scratching their heads. During Tuesday’s House budget debate, state Rep. Cary Condotta, R-Wenatchee, declared, “We’ve been trying for years to get people off cigarettes, and we’ve spent millions of dollars convincing them to do so, and we’ve had some success, but nothing even close to what the vapor industry has done to move people away from smoking.” Muri says he is thinking of coming back next year with a proposal to reward the business with a tax break. And it is worth noting that when the bill came up for a vote in the Finance Committee Monday, it took Democratic leaders an hour and a half behind closed doors to sell members on the tax. State Rep. Chris Reykdal, D-Olympia, wasn’t buying. “I lost my mother to lung cancer,” he said. “There’s no question in my mind that if she had a vape option during her 30 years of smoking, she would be alive today.”

The bill passed in committee, just barely, by a 7-6 vote.

So Firm, So Fully Packed

Shaun d'Silva, owner of Bubba's Vape Shop in Battleground and Vancouver.

Shaun d’Sylva, owner of Bubba’s Vape Shop in Battleground and Vancouver.

Every bit as interesting as the philosophical debate is the way the issue has seemed to hit home with e-cigarette users. The crowds filled the House hearing room last week and spilled into an overflow room in the basement. Dozens more puffed away out at the sundial between the House and Senate office buildings, where particular people congregate. There really wasn’t any testimony in favor of the tax, save a brief statement from Susie Tracy, representing the Washington State Medical Association. The organization has recently passed a resolution calling for the prohibition of e-cigarettes, because the young might get hooked on smoking.

And the rest of the crowd scoffed. “I’ve yet to see one person get started vaping and go on to cigarettes,” said Pierce County merchant Anthony McMullen. “It is like going from licking dirt to eating a cake – it is totally a completely different thing.” There were attorneys in three-piece suits and hipsters with mohawks, nose rings and tattoos. “The e-cigarette has saved my life,” said former 20-year smoker and cancer survivor Angela Britten. “If this tax is imposed, I very well likely will go back to smoking because of the tobacco addiction that has had a hold on me for so long. I am afraid that if this tax is imposed I will go through chemo again, and this time I won’t make it. And that is going to leave my three children without a mother.”

Jim Oliver, a partner in Tacoma’s Steam Pump Vaporing Lounge, said he had been a smoker since high school. Last year he had enough of his wind back that he was able to run the New York City Marathon – while vaping. “This is a fantastic product,” he said. “Do not increase taxes on it. It doesn’t help anybody. You’re telling smokers to either quit or die.”

Republicans are shaking their heads in disbelief. Are the Democrats really going to push it? wonders House Republican Floor Leader J.T. Wilcox, R-Yelm. In the swing districts of the urban Puget Sound area, all it takes is a few hundred voters to swing an election result – and a single issue can do the trick. “This is going to be a very tough vote for the Democratic Caucus to take,” he says. “These are passionate believers in the product. Probably many of them are Democratic voters. We are threatening their ability to make a living and it is a thing many of them believe save their health. A 75 percent tax is like a death sentence for many of these outlets, and I think a lot of people are going to be very angry about that.” That cloud they’ll be sending the Legislature’s way Saturday may offer a hint.