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Vapor Pledge War

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A big battle over a tiny tax has erupted at the S.C. State House, with two organizations arguing over whether a new levy on e-cigarettes (a.k.a. vapor cigarettes) constitutes a violation of lawmakers’ taxpayer protection pledges.

In one corner is a local organization – the South Carolina Association of Taxpayers (SCAT). This group says the new levy doesn’t violate its taxpayer protection pledge because “dynamic forecasting models” show most e-cigarette consumers are “migrating from higher-taxed (and greater health risk) smoked cigarettes.” Accordingly, SCAT says this legislation would actually wind up being a net reduction in the state’s aggregate tax burden.

Hmmmm … we’re not sure if we buy that logic (the net reduction would be larger without any vapor tax at all), but SCAT’s release does raise a good point.

“If not assigned an appropriately lower tax rate, we are confident the context will shortly become one of taxing them at higher prevailing rates,” a letter from the group’s president states.

That’s accurate – especially in the “Republican-controlled” State Senate, which demonstrated earlier this week that it is still fully beholden to the tax-and-spend mode of governance.

In the other corner? Americans for Tax Reform (ATR), a Washington, D.C.-based organization which administers a national “taxpayer protection pledge.”

“This bill includes a new tax on vapor products,”a release from ATR’s Beltway office states. “While changing the tax structure to accommodate new products is important, it must not come at the net expense of taxpayers. For this bill to be compliant with the Taxpayer Protection Pledge, the new tax on vapor products must be stripped or offset with a corresponding tax cut elsewhere. If this bill were amended to lower taxes elsewhere so that it did not result in a net revenue increase for the state, ATR would drop its opposition.”

Here’s the thing, though. ATR’s “opposition” – as we’ve noted in the past – is entirely selective. In fact we’ve written extensively about the pointlessness of the ATR pledge given its total lack of enforcement.

Seriously … where was this group when South Carolina lawmakers were jacking up the tax on conventional “burn down” cigarettes?

Anyway, our guess is House Republicans – who loathe the influence of out-of-state groups – are likely accept the SCAT interpretation as this debate moves forward. However it will be interesting to see whether ATR’s call for a “corresponding tax cut” gets any play.

As we’ve stated repeatedly, we reject any tax hike on principle – however this debate has been dominated by all sorts of misinformation (most of it stemming from inaccurate mainstream media reports). In fact as a result of this misinformation one vapor cigarette user told us the new tax would “more than double” the purchase price of e-cigarettes – although this claim was quickly retracted after we provided the user with a copy of the legislation.

Either way we’ll be digging into the consumer side of this debate in more detail in the coming weeks, so stay tuned for those reports …

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