Buried in New York Gov. Kathy Hochul’s massive $260 billion budget proposal is a new tax to make buying a can of nicotine pouches as expensive as buying a pack of cigarettes. Hochul says the tax would raise $18 million in the first year and $44 million upon full implementation. Given the state’s large budget, the projected revenue increase is small, but the negative impacts on public health would be high.
Commenting on the planned tax increase, New York State Budget Director Blake Washington said the Hochul administration views nicotine pouches and cigarettes as a “distinction without a difference.” But nothing could be further from the truth.
Nicotine pouches contain no tobacco and produce no smoke. Users place a small pouch between their lip and gum, getting the nicotine they want without the tar and carcinogens that make cigarettes deadly. Nicotine is addictive, but it’s not what kills smokers; the combustion is. That’s partly why Sweden, where the oral tobacco product snus has been popular for decades, has the lowest smoking and lung cancer rates in Europe.
Last year, the Food and Drug Administration authorized ZYN and on! PLUS nicotine pouches because they’ve proven to be safer than cigarettes, help smokers quit smoking, and aren’t appealing to kids.
The case for further taxing tobacco is a familiar one: discourage a deadly habit, recoup health care costs, and prevent youth initiation. But heavily taxing safer alternatives to cigarettes keeps smokers from switching to better substitutes.
Rather than focusing on new taxes, Gov. Hochul could make better use of the roughly $1 billion in existing tobacco tax revenue to strengthen enforcement of retailer compliance and prevention programs and ensure New York’s youth tobacco use remains among the lowest in the nation.
Young people would continue to be protected from adult products, and adults who wish to quit smoking by using a safer alternative would be incentivized to do so.
It is important to note that youth tobacco use is at a historic low, with e-cigarette use declining by 70% since 2019. When the Food and Drug Administration authorized Zyn for protection of public health last year, it weighed the risk of underage use and, after careful consideration, determined the product was not sufficiently appealing to have widespread uptake among minors.
Less than 3% of high school seniors reported current nicotine pouch use in the latest National Youth Tobacco Survey, and 3% of students had used a pouch in the New York Youth Tobacco Survey, despite Zyn having been sold for more than 10 years.
From a public health perspective, New York should encourage existing smokers to stop smoking and consider switching to safer products. New York already has the highest cigarette tax in the country, a ban on menthol cigarettes, and a raft of other anti-smoking policies. These policies have spawned large illicit markets, with New York having the second-highest amount of inbound cigarette smuggling in the country and losing more than $800 million in tax revenue due to black market sales. And smoking remains the leading cause of preventable death in the state, with over 28,000 New Yorkers dying annually from smoking-related diseases.
From a smoker’s perspective, a pack-a-day habit in New York City can cost around $5,000 annually, including taxes. Switching to nicotine pouches could save smokers thousands of dollars in taxes while eliminating virtually all their smoking-related health risks. That’s a powerful incentive for the 1.4 million New Yorkers who still smoke. But if Gov. Hochul’s tax passes, that price advantage would narrow considerably. Some smokers would stick with cigarettes. Others who are in the transition from smoking to pouches would find it more expensive, decide it’s no longer worth it and relapse to smoking.
Research consistently shows that higher taxes on e-cigarettes lead to increased traditional cigarette sales, as price-sensitive smokers stick with the deadlier option. The same substitution effect will occur with nicotine pouches. Smoking rates are the highest among low-income and non-college-educated households—those who would benefit most from cost-effective alternatives to cigarettes.
For smokers who want to quit but have failed so far, New York’s policies should encourage safer alternatives to cigarettes. But if Gov. Hochul’s nicotine pouch tax hike gets approved, one of the most anti-tobacco states will be implementing a policy that unintentionally pushes smokers toward cigarettes.