Submitted by David B Beaver
In July of 2016 Pennsylvania passed a House budget bill with Bipartisan support. This bill included a new tax to be levied on the sale of smokeless tobacco products sold by what can collectively be referred to as the vaping industry. This tax represents one of the state's many attempts to solve or at least help solve its budget crisis, in this case by introducing a new tax. It was projected that the new tax could raise as much as $13 million in revenue within the first year of its passage. Never mind that most critics said these predictions would fall short, and that harm the industry as a whole potentially reducing those figures even further as more of the states vape shops would shut down, the legislature decided the state simply needed the revenue. With the debt clock ticking around $126 billion and climbing as the Legislature continue to unconstitutionally pass unbalanced budgets, we can only assume they are scraping for every penny they can get.
The tax itself is considered to be one of the highest of its kind in the nation (a staggering 40%) but is also one of the broadest in scope. The vape tax not only applies to e-vapor liquids (juice) but also to every kind of vaping device AND any component used in its design from the tubes all the way down to the batteries. The new tax also included a retroactive 40% "floor tax" on all current inventory that the states vape shops already had in stock. Upon the bill's passage, the owners were forced to fork out a lump sum. This part of the bill alone, many said, would force store closings throughout the state.
According to Chris Hughes, the owner of Fatcat Vapor Shop:
“No shop can pay this tax so all shops will be out of business.”
Unfortunately, his voice was ignored along with many others, but their predictions proved to be true. In the first five months after the tax's introduction alone over 70 of the states then approximately 300 vape shops had already closed their doors. They lost their businesses and their livelihoods while the state lost revenue.
In response to initial criticisms, the tax would simply cause Pennsylvania's vaping customers to send their business out of state by ordering from online retailers they included in the tax a law that required all residents to report any out of state purchases to the Depart of Revenue and pay 40% tax out of their own pockets. If they refused they faced a $5,000 penalty or up to five years in prison. In other words, if you buy an Ecig from out of state from a business operating and paying taxes in another state and forget to tell your local tax collector you could be paying a visit upstate. Odd, considering the state had to close two prisons this year due to budget constraints that they would be looking for more reasons to put us there. Despite this, however, the critics we're right again. Vape shops across the state continue to close their patrons across the state continue to cross the state border either on foot or online, to enjoy their vaping products free of the heavy handed tax.
As this crisis continues to haunt the state's industry one small glimmer of hope does come in the form of SB508. This pending state legislation would narrow the vape tax's scope to E-Vapor liquids and reduce its overall rate to only 5 cents per milliliter of liquid. This reasonable compromise has drawn the endorsement vape shop owners across the state along with their patrons, but only time will tell if the general assembly has learned from their mistakes.
Meanwhile, there are a few lessons to be learned. The first is that there is simply no substitute for fiscal responsibility, especially if we are ever to solve the states worsening budget crisis. We also see that new taxes for short term revenue end up doing long term, and sometimes even immediate harm.
This whole mess raises another interesting question as well. In the very first line of Article I of the commonwealth's constitution we read:
"All men are born equally free and independent, and have certain inherent and indefeasible rights, among which are those of enjoying and defending life and liberty, of acquiring, possessing and protecting property and reputation, and of pursuing their own happiness."
So as we approach the taxation of humanity's "vices" and the attempts to tax away from our society what some people don't care we must ask:
If it is our right to pursue our own happiness, to do things and enjoy things that make us happy, is it ok for the government to deprive the people of those things away through excessive taxation? I'll let you be the judge.