Alaska should tax safer nicotine products at lower rates than cigarettes

A version of the following public comment was submitted to the Alaska State Legislature House Finance Committee hearing on Senate Bill 24 on May 5, 2026.

I appreciate the opportunity to share our perspective on why Alaska should refrain from imposing such a punishingly high tax on e-cigarettes and keep its tax policies in line with the growing scientific consensus that e-cigarettes represent one of the most significant opportunities to reduce smoking-related death and disease.

The case for tobacco harm reduction

Smoking remains the leading cause of preventable death and disease in Alaska, responsible for an estimated 600 deaths annually. According to the most recent available data, Alaska’s smoking rate is above the national average at 14.7 percent.  Many of these smokers have tried to quit using traditional cessation methods such as nicotine patches and gums, which have a failure rate exceeding 90%, and have been unable to do so. For these individuals, e-cigarettes offer a viable path away from the most dangerous form of nicotine delivery: the combustible cigarette.

The scientific basis for tobacco harm reduction is well established. The principal harm from tobacco use stems not from nicotine itself, which, while addictive, is not the primary cancer-causing agent. The cancer risk is from the combustion of tobacco and the inhalation of the resulting smoke. Products that deliver nicotine without combustion, such as e-cigarettes, pose a fraction of the risk of cigarettes. The U.S. Food and Drug Administration (FDA) recognizes a “continuum of risk” regarding nicotine products, with cigarettes being the most dangerous and non-combustible alternatives being far less harmful.

This framework underpins the agency’s regulatory approach, which requires all new nicotine products to demonstrate that they are “appropriate for the protection of public health” before they can be legally sold. To date, the FDA has authorized multiple e-cigarettes. Each of these authorizations reflects a determination that the product provides a net benefit to public health, taking into account both current tobacco users and the potential impact on non-users, including youth.

International evidence supports tobacco harm reduction

The United States is not alone in recognizing the public health potential of safer nicotine products. Some of the most compelling evidence comes from international experience.

The United Kingdom has been a global leader in embracing tobacco harm reduction as official public health policy. Public Health England (now the Office for Health Improvement and Disparities) has repeatedly stated that e-cigarettes are approximately 95% less harmful than smoking. The U.K. government has actively encouraged smokers to switch to e-cigarettes as a cessation tool, and the National Health Service offers e-cigarettes as part of its quit-smoking services. The U.K.’s Medicines and Healthcare products Regulatory Agency has also approved a medicinally licensed e-cigarette for prescription to smokers.

New Zealand has similarly embraced tobacco harm reduction. The New Zealand government’s Smokefree 2025 action plan explicitly recognized the role of vaping as a tool to help smokers quit, and the country’s regulatory framework taxes e-cigarettes at significantly lower rates than combustible cigarettes. New Zealand’s Ministry of Health has stated that vaping products are “significantly less harmful than smoking tobacco” and has supported the availability of these products as part of its broader strategy to reduce smoking prevalence. This approach has contributed to a dramatic decline in smoking rates, with daily smoking among adults falling from 13.2% in 2018 to 6.8% in 2023.

The case for risk-proportionate taxation

The rationales for taxing cigarettes are well established: to offset the external costs smokers impose on non-smokers through increased healthcare expenditures, to deter use, and to discourage youth initiation. However, these rationales do not apply with equal force to products that pose a fraction of the risk of cigarettes. Taxing safer nicotine alternatives at rates comparable to cigarettes is counterproductive because it eliminates the financial incentive for smokers to switch, thereby keeping more people smoking.

The literature consistently shows that higher taxes on safer nicotine products like e-cigarettes result in more cigarette smoking. An analysis of Minnesota’s 95% wholesale tax on e-cigarettes found 32,400 additional smokers than there would have been without the tax. A separate analysis found that for every e-cigarette pod eliminated by an e-cigarette tax, 1.9 additional cigarette packs are sold.

Research on young adults aged 18 to 25 found that e-cigarette taxes were associated with reduced vaping but were similarly associated with increases in smoking, with the authors concluding that “the unintended effects of … taxation may considerably undercut or even outweigh any public health gains.”

These substitution effects are not surprising. Because safer nicotine products are substitutes for cigarettes, policies that make them more expensive relative to cigarettes predictably drive consumers back to the more dangerous product. Risk-proportionate taxation is essential to ensuring that the tax system supports rather than undermines public health. Taxing lower-risk products at comparable rates to cigarettes sends a perverse signal to consumers that the products are equally dangerous, compounding the problem of risk misperception.

Taxes on safer nicotine products should always be substantially lower than those on cigarettes, if they are taxed at all. The wider the tax gap between cigarettes and safer alternatives, the stronger the incentive for smokers to switch, improving their short- and long-term health.

Conversely, taxing safer alternatives at rates comparable to cigarettes removes this economic incentive and disproportionately burdens the populations most in need of affordable harm-reduction options. High taxes on safer nicotine products represent one of the most regressive forms of taxation, penalizing consumers for making a choice that improves their health and reduces the burden on the healthcare system.

SB 24’s retail vapor tax is substantial at 25 percent and would compound the already high taxes on e-cigarettes that most Alaskans face. Anchorage Borough and Matanuska-Susitna Borough impose a 55 percent wholesale tax on vapor products, while Juneau, Petersburg, and Northwest Arctic Borough impose a 45 percent wholesale tax. Should SB 24 pass, in Anchorage, a pack of four e-cigarette pods authorized by the FDA would cost around three times as much as a pack of cigarettes. Such high taxes significantly reduce the incentive to switch from the most dangerous form of nicotine to one that is substantially safer.

Conclusion

We respectfully urge the House Finance Committee to consider the following principles as Alaska approaches the issue of tobacco taxation: First, taxes on non-combustible nicotine products should be substantially lower than taxes on combustible cigarettes. Second, avoid following the example of states that have imposed punitive taxes on safer nicotine alternatives; the empirical evidence shows that this leads to increased cigarette smoking and worse public health outcomes. Third, policymakers should consider the regressive nature of high taxes on safer nicotine products and the disproportionate impact on lower-income smokers who would benefit most from affordable alternatives to cigarettes.

Ensuring Alaska’s tax policy aligns with the FDA’s scientific framework and the international evidence on tobacco harm reduction would represent sound fiscal and public health policy.

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Source: https://reason.org/testimony/alaska-should-tax-safer-nicotine-products-at-lower-rates-than-cigarettes/