Significant increases in tobacco excise taxes are widely considered the single most effective policy for reducing tobacco use and its consequences.In recent years, as new tobacco products and vaping products have emerged
and grown in popularity, governments have struggled to determine how best to tax these products. The potential for some of these new products to be significantly less harmful than cigarettes and other traditional tobacco products has added to the complexity, with some proposing a harm reduction approach that would apply differential taxation based on the relative harms of different products. This is further complicated by the rapid evolution of these products and limited, at best, regulation of these products. This report begins with an assessment of current tobacco and vaping product taxes in the United States. This is followed by a discussion of the challenges that states have encountered in implementing taxes on electronic cigarettes and other vaping products. Based on these experiences, we propose a set of recommendations on how to best tax these products and discuss the potential for differential taxation based on a determination by the Food and Drug Administration that some products are modified risk tobacco products that are likely to be of less harm to the public health.