As Americans head to the polls, they’ll be weighing critical issues that will shape policymaking for years. No matter who wins, the next president needs to ramp up the fight in tackling the crisis of illegal vape products flooding the U.S. market.
New research from the Tax Foundation highlights the systemic under-taxation of illegal vapes and other contraband that create the wrong incentives. By avoiding punitive taxes, lower-priced, unregulated illicit products undermine legal products that are designed to help smokers move away from cigarettes or quit smoking.
As much as 98 percent of vaping products sold are illegal, a staggering figure that reveals the depth of the problem. The proliferation of illegal vaping products is undermining public health efforts and driving up taxes on legal, less harmful alternatives to traditional cigarettes. This situation demands urgent attention from the Food and Drug Administration and state authorities.
This is a substantial problem nationwide. In Maryland, illegal disposable vaping products are, on average, $4.52 cheaper than those with Premarket Tobacco Product Marketing Granted Orders (MGOs) granted by the FDA — the largest difference in the country. In the District of Columbia, illegal products are $4.10 cheaper; in California, the difference is $2.51.
This price disparity is not just a trivial inconvenience; it has significant tax and public health implications. Legal vaping products with MGOs, designed to help smokers quit traditional cigarettes, are becoming less accessible due to higher costs driven by increasing state vaping taxes.
The FDA’s stringent and slow process for approving vaping products has only exacerbated the situation. Since October 2019, the FDA received 26.6 million premarket tobacco product applications (PMTAs), yet it has granted marketing orders to only 34 products — total. This bottleneck has created a vacuum filled by a deluge of illegal products from China, which are not only easier to obtain but also often cheaper because they evade taxes.
The lack of enforcement on illicit vaping products is critical. While the FDA has issued 680 warning letters to manufacturers, importers, distributors and retailers, this is insufficient. In October 2022 and February 2023, the FDA initiated its first permanent injunction and first civil money penalty complaints, respectively, against e-cigarette manufacturers, but more robust actions are needed.
Illegal products continue to flood the market, and retailers often do not charge or remit taxes on these items. This tax evasion further distorts the market, putting legal products at a massive disadvantage.
Maryland, like other states, imposes an excise tax on vaping products. However, the presence of illicit products means that these taxes are not uniformly applied, resulting in a messy and inefficient tax system. Legal, FDA-approved products, which should ideally be the more attractive option for smokers looking to reduce their harm from cigarettes, are priced higher because they bear the full burden of these excise taxes. This situation is directly counterproductive to public health goals, as it discourages smokers from switching to less harmful alternatives.
To address this issue, a two-pronged approach is essential.
First, there must be better enforcement to limit the vast availability of illegal vaping products. In addition to the FDA’s enforcement responsibilities, state revenue departments could play a crucial role by collecting detailed data on vaping sales and ensuring that taxes are properly charged, collected and remitted. This would not only level the playing field in the market but also increase state revenues that can be reinvested in public health initiatives.
Second, the FDA must streamline its product approval process. The current system is far too slow and cumbersome, preventing many potentially beneficial products from reaching the market. By speeding up approvals and providing clearer guidelines, the FDA can help ensure that legal, harm-reducing products are available to smokers. This would help decrease the market share of illicit products, while also supporting smokers in their efforts to quit traditional cigarettes.
With the election poised to shape the FDA’s leadership and regulatory stance, the next president must prioritize enforcement against illicit vape products and streamline approval for legal, harm-reducing alternatives. The stakes are high: America’s smokers deserve access to affordable, regulated products designed to support their health. Addressing this crisis through robust enforcement and a more efficient FDA approval process could lead to a healthier, fairer market — one that places public health above tax loopholes and illegal markets.
