The FDA has no authority to tax anything, and taxation has zero relationship with FDA regulation, and I strongly disagree with Jonathan Fould's sentence regarding e-cigarette taxation (just as I strongly disagreed with Foulds' endorsement of Eissenberg's "not enough nicotine" claims about e-cigarettes).
But if/when FDA reclassifies e-cigarretes as tobacco products, there will be some "regulatory costs of doing business" on e-cigarette manufacturers/importers (as with tobacco companies), but it is unknown if that would translate into higher costs to consumers (as economies of scale created by overall volume increases and increased competition is likely to reduce retail prices).
Only US Congress, state legislatures and some local governments in several states (e.g. AL, IL) have the legal authority to impose excise taxes on tobacco products.
In 1991, I led the first campaign in the US to increase cigarette taxes (for the purposes of recovering public healthcare expenditures due to smoking, to reduce cigarette consumption, and to fund SCHIP) when collaborating with then PA Gov. Bob Casey to raise the state cig tax from $.18/pack to $.32/pack), and I've actively campaigned (more than any other person in the US) to raise state and federal cigarette tax rates since then (including SCHIP last year).
Largely due to SCHIP, nationwide cigarette consumption dropped by 9% from 2008 to 2009. SCHIP's tobacco taxation rates promotes harm reduction (as the federal cigarette tax is $1.01/pack, but the tax on moist snuff is just $.11/can, and large cigar tax rates are significantly lower than cigarette tax rates).
It is highly unlikely that any state legislatures or US Congress will impose taxes on e-cigarettes for at least the next several years, if for no other reason than because taxing e-cigarettes would generate less tax revenue than it would cost for any government to establish, administer and collect.
For the past 15 years, I've been urging the PA legislature to tax Other Tobacco Products (PA is the only state that doesn't tax smokeless, while PA and FL are the only two states that don't tax large cigars). Up until several years ago, I was by Governors and many PA legislators that the $25-$50 million in annual tax revenue generated by taxing OTP wouldn't be worth the political costs of trying to get it enacted).
But if/when sales of e-cigarettes increases by another five or ten fold (i.e. 5-10 times what is now sold), I suspect that CTFK/ACS/AHA/ALA will begin urging state legislatures to tax e-cigarettes.
And since CTFK, ACA, AHA, ALA have been campaigning to tax OTP (at the state level) at the same rate cigarettes are taxed (even though most OTP are far less hazardous than cigarettes), I strongly suspect that these groups will advocate taxing e-cigarettes at the same rate as cigarettes are taxed (e.g. 30% of wholesale/retail price).
I've been the only public health activist who has been advocating OTP tax rates that are lower than cigarette tax rates, especially for smokefree tobacco products.
Bottom line on e-cigarette taxes, we won't have to worry about those battles for several years (and by then there should be a lot more e-cigarette users to help us oppose/minimize taxes on e-cigarettes).
