Why Big Tobacco Is Getting Hooked on E-Cigs
No big state taxes means no black market
By Ruth Brown, Newser Staff
Posted Aug 26, 2013 6:49 PM CDT
A person poses with an electronic cigarette.   (AP Photo / Tim Ireland, PA)

(Newser) – The American e-cigarette business is booming: It's expected to make more than $1 billion this year, and sales are projected to overtake those of real cigarettes by 2047. Big tobacco is probably fine with this, reports BusinessWeek, and the reason why is surprising. According to a recent report, an average of 11% of cigarettes sold in each US state are smuggled in, and that figure is way higher in states like New York (61%), Arizona (54%), and New Mexico (53%). "Smuggled" smokes can be anything from those brought in from other states with lower taxes to counterfeit cigarettes—which are sometimes stuffed with sawdust and "human excrement."

"Once a tax gets too high, it acts in the same way that Prohibition did: You get substantial black-market activity," says an economist. E-cigs, on the other hand, are only subject to regular sales taxes, so the black market incentive isn't there. Tobacco giants are now moving their focus to the e-cig market and launching products of their own. Of course, now the FDA is looking to start regulating the industry, as the Wall Street Journal reports. But bans on online sales or advertising restrictions probably won't bother them that much, the BusinessWeek report suggests—so long as they're not hit with taxes.

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Showing 3 of 30 comments
gomer99
Aug 27, 2013 9:00 PM CDT
Tax nannyism. Then we could do away with all other taxes. And maybe people would leave people THE FUCKKKK ALONE
JBHK
Aug 27, 2013 9:23 AM CDT
I quit smoking because of e-cigs. It worked for me. It may not work for everyone, but they do work for some people.
Edgar
Aug 27, 2013 8:08 AM CDT
Let people enjoy themselves, if they feel that cigarettes give them pleasure then so be it. Taxes should be regulated to give the maximum returns on tobacco ! Smoking should be encouraged. Not that I smoke myself but I think of others.