In interviews I’m often asked why, if vaping is 95% safer than smoking, there are plenty of negative stories around vaping. My response is that vaping is a disruptive industry which threatens a lot more than US$700 billion in tobacco revenues and US$250 billion in tax revenues. It’s inevitable there’s going to be opposition to vaping. But I’m always uneasy this may be interpreted as a conspiracy theory. So to illustrate the scale of the problem, we chose to put some data behind the assertion.

The final results are astonishing. Not just is Best Rated E Cig costing billions in tax revenue, it might force a few of the very states which have lead the charge against vaping into effective bankruptcy. Graph showing world tobacco revenue vs tax.

Vaping and Tobacco Tax in the us – We’ll start with tobacco revenues in the us – not because they’re insignificant throughout the uk and the EU (as we’ll see, the opposite is the case) but because that is certainly where nearly all opposition to vaping appears to be originating. At its peak during 2010 tobacco tax revenues reached 17.16 billion dollars. But that amount continues to be coming down rapidly as smokers quit or move to alternative types of nicotine – predominantly vaping. In 2018 projected revenues were 20% lower at 13.67 billion dollars. (Source: Statista).

So how is vaping affecting tax revenues? In 2018 there was 34.3 million smokers in the united states – and 10.8 million vapers, equal to almost 32% of the smoking population. When we divide total tax revenue by the amount of smokers, we end up getting $400 per smoker. Multiply that by the amount of vapers and that we obtain a total tax price of $4.3 billion.

Needless to say, those are very rough figures. Some vapers men and women will be dual users (both vape and smoke), so will still be contributing towards some tobacco tax revenues, and naturally you will have some taxes on vaping. But however you work, vaping is unquestionably costing the united states government billions in lost tax revenues.

That sounds a whole lot, but does look insignificant as compared to the total US tax receipts, estimated to be $3.65 trillion in 2019. But things start looking a great deal worse once we look at individual US states – as well as the bonds they may have issued that are backed by tobacco revenues.

In 1997 tobacco companies agreed to pay 46 states greater than 200 billion dollars over twenty-five years. The idea was to cover the price of treating smoke related diseases, although in reality the amount of money was often used on other purposes. For instance, one state decided to spend 75% of the total on tobacco production. The biggest recipient was California, which is to receive over 12% of the total amount.

Remember that. The exact amount is not occur stone, and among the variants is the volume of cigarettes sold. The fewer cigarettes sold, the less cash state governments receive, making a perverse incentive to maintain tobacco sales high. (Intriguingly, if the sales of the tobacco companies inside the agreement fall below those of companies not within the agreement, the states also get less cash, making a second perverse incentive to stifle competition.) Crucially, while original estimates allowed for a slow decline in smoking rates, they failed to permit vaping, and vaping will not be included in the master settlement agreement.

Tobacco Secured Bonds and Looming Bankruptcy. Rather than waiting for the tobacco money in advance, states sold bonds to investors. They promised to repay these bonds utilizing the money from tobacco settlement. As a result of guaranteed flow of cash through the tobacco settlements, at that time investors considered these bonds a secure option.

Nevertheless the states didn’t want to pay any interest at the beginning of the bonds. Instead, they wanted to permit the interest to roll up, kicking on the actual interest payments to later down the road. In exchange, they consented to pay uubnmg often the first amount borrowed.

How much? Well, in some cases payments are likely to be 76 times the primary payment. Millions in initial advances translated into billions of dollars in interest payments. And furthermore, as the repayments are extremely high, Moody’s estimates that 80% in the bonds are likely to default.

California is behind on its payments, while New Jersey has pledged its remaining 406 million dollars in tobacco revenue to rescue two bonds. Additionally, New Jersey has experienced its credit rating downgraded, making it more expensive for your state to borrow money.

What will happen if the bonds are not repaid? Unfortunately, they don’t disappear. Bond holders have priority over taxpayers, and states need to foot the bill – and pay additional interest because of this. So that as for all of the cash raised to begin with – well, for a few states that’s over. David Rosseau, during the time Deputy Treasurer of New Jersey, admitted that: “We basically burned everything by two years. It had been not certainly one of New Jersey’s better financial moves.”

Ecigs – Why So Much Interest..

We are using cookies on our website

Please confirm, if you accept our tracking cookies. You can also decline the tracking, so you can continue to visit our website without any data sent to third party services.