Should all tobacco products be taxed the same?

Eric Crampton writes:

Even though smoking rates have declined, nothing suggests that current policy will achieve the Government’s goal of getting smoking down to less than 5 percent of the population by 2025.
And so we come to the promising car that has come around the corner – new and safer ways of accessing nicotine.
Spend any time walking around a downtown urban centre and you will notice the clouds of vapour coming from former smokers who have switched to a less harmful alternative. Rather than berating smokers for their habit, vaping offered a way of delivering nicotine without combustion’s nasty consequences.
But vaping is hardly the only alternative out there.
Nicotine gum and patches have long been prescribed as stop-smoking solutions, but simply haven’t worked for a lot of smokers trying to quit.
Swedish snus is a powdered tobacco contained in a small sachet that looks like a teabag; users place the sachet behind their lower lip. Snus is far safer than smoking or traditional chewed tobacco, has been an important part of Sweden’s decline in smoking rates since the 1980s, but has only recently became available in New Zealand. And new technology that heats tobacco rather than burn it, and consequently avoids creating the carcinogens that come with combustion, is now on the market too.
There have to be a wide variety of options available for people wanting to cut down or quit smoking because different things work for different people.

This is a key point – no one approach will work for all. But there is little doubt that many smokers are transitioning to vaping.

Philip Morris makes one of the newer reduced harm products. Its Iqos device heats non-combustible tobacco rather than burn it. Iqos is less harmful than smoking, but perhaps not quite as safe as vaping – the science is still being settled on that one. Nevertheless, ‘heets’ (the tobacco sticks used in Iqos) face the same tobacco excise rate as cigarillos. Excise on cigarette tobacco is just over $1,300 per kilogram or about $0.92 per cigarette. Excise on other tobacco products, from cigars and cigarillos to snus and ‘heet’ sticks, runs just over $1,150 per kilogram of tobacco.
In every other aspect of tobacco control policy, the Government has been adamant that price is an effective deterrent. That is why it imposes excise taxes that cost a pack-a-day smoker more than $6,700 per year, despite the regressive effects of that tax regularly highlighted in Statistics New Zealand’s inflation updates.
If the Government wants people to switch from smoking to less harmful alternatives, why does it impose the same tax on combustible tobacco as on tobacco that is used less harmfully? A 10-gram packet of snus selling for $21, containing 15 sachets, draws about $11.50 in excise – or about $0.77 per sachet. A 10-gram packet of cigarillos would draw the same excise.

If the aim of the tax is to reduce harm, rather than raise revenue, then there should be different levels of taxation based on the harm.

When the Prime Minister quipped that Philip Morris could simply stop selling cigarettes here, she absolutely missed the point. Other cigarette companies would fill the gap in the market. But if reduced-harm products had a greater price advantage over cigarettes through a risk-proportionate excise regime, more smokers overall might switch.

Policy is much harder than slogans.