Democrats on Monday reintroduced legislation to establish a new federal e-cigarette tax, increase the tobacco tax rate and close tax loopholes.
U.S. Senate Democratic Whip Dick Durbin of Illinois and U.S. Sen. Ron Wyden, (D-Oregon), together with U.S. Rep. Raja Krishnamoorthi (D-Illinois) and five other senate Democrats, backed the End Tobacco Loopholes Act, which would follow the lead of 30 states and Washington, D.C., that have set their own state taxes, by setting a federal tax on these vaping products.
Durbin said the federal law has not been updated in 16 years, creating loopholes that the tobacco industry has exploited. In 2021, Democrats, including Durbin, backed the Tobacco Tax Equity Act of 2021, which tried to make amendments to the Internal Revenue Code of 1986.
“Our most effective strategy to reduce smoking and prevent a new generation from becoming addicted is to price these dangerous tobacco products out of the reach of children,” Durbin said. “The End Tobacco Loopholes Act would help reduce tobacco and e-cigarette use, save billions in health care costs and improve the health of children for generations to come,” he said.
Durbin said the bill would close tax code loopholes for tobacco products by increasing the federal tax rate on cigarettes, pegging it to inflation and setting the federal tax rate for all other tobacco products at the same level.
“The legislation also closes numerous tax and regulatory loopholes that the tobacco industry has exploited for large cigars, smokeless tobacco, and pipe tobacco by shifting production and sale schemes to avoid taxes and oversight, resulting in nearly $4 billion in lost federal revenue between 2009 and 2018,” Durbin said in a statement.
According to Durbin, large cigars, smokeless tobacco and pipe tobacco remain undertaxed compared to cigarettes.
“E-cigarettes are the most commonly used tobacco product among youth and are now subject to the full regulatory framework of the Food and Drug Administration’s (FDA) Premarket Tobacco Product Applications, they are not subject to federal taxes—which has created an effective price discount that has contributed to the explosion of youth use of e-cigarettes,”
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