New research suggests badly designed nicotine taxes could backfire by narrowing the price gap between smoking and lower-risk products
Governments have used cigarette taxes for decades to reduce smoking. The logic is that if cigarettes cost more, fewer people will buy them.
But the nicotine market has changed. Cigarettes now sit alongside vapes, heated tobacco products (HTPs) and nicotine pouches.
These products are not risk-free, and should not be used by children or people who do not already use nicotine. But for adults who smoke, they can offer a crucial route away from combustible tobacco.
That makes tax policy more complicated. A tax that reduces vaping may look successful if vape use is measured in isolation. But if some consumers respond by buying more cigarettes instead, the public health calculation changes.
A growing body of research suggests this is not just a theoretical concern.
A new South Korean study, published in Tobacco Control, found that higher vape prices were associated with “expenditure reallocation towards conventional cigarettes”. The study also found “substantial substitution between e-cigarettes and conventional cigarettes”.
For public health, the issue is not simply whether a product contains nicotine, it is how much harm that product causes compared with smoking.
Cigarettes are especially dangerous because they burn tobacco. It is the smoke from combustion that causes most of the disease and death linked to smoking. Vapes, HTPs and nicotine pouches do not involve burning tobacco.
South Korea: higher vape prices linked to cigarette spending
The South Korean study examined conventional cigarettes, HTPs and vapes together, rather than treating each product in isolation.
It found that vapes were particularly sensitive to price changes. The study said, “e-cigarettes exhibited the highest own-price elasticity, indicating greater sensitivity to price changes”. It also found that increases in vape prices were associated with spending moving towards conventional cigarettes.
U.S. young adults: less vaping, more smoking
A U.S. study published in Addiction looked at 18 to 25-year-olds and found a similar trade-off.
The study examined responses to taxes on cigarettes and electronic nicotine delivery systems (ENDS), the category that includes vapes. It concluded: “In the United States, higher ENDS tax rates are associated with decreased ENDS use but increased cigarette smoking among 18 to 25‐year‐olds.”
The same study found that cigarette taxes and vape taxes pushed behaviour in opposite directions. Higher cigarette taxes were associated with reduced smoking and increased vape use, while higher vape taxes were associated with reduced vape use and increased smoking among young adults.
Minnesota: high vape tax linked to reduced quitting
Research on Minnesota’s high vape tax provides evidence focused on adult smokers.
A study published in the Journal of Risk and Uncertainty looked at Minnesota’s tax on vapes and its effect on adult smoking. The authors concluded that the tax “increased adult smoking and reduced smoking cessation in Minnesota, relative to the control group”.
The paper estimated that about 32,400 additional adult smokers would have quit smoking in Minnesota during the study period if the tax had not been in place. It also estimated a cross elasticity of current smoking participation with respect to vape prices of 0.13.
Youth taxes can also have unintended effects
Youth vaping is a legitimate concern. Nicotine products should not be marketed to children, and governments have a responsibility to prevent youth uptake.
But evidence suggests that even youth-focused vape taxes need to be assessed against smoking outcomes.
A study published in the Journal of Health Economics found that vape taxes reduced youth vaping, though the estimated effect was relatively modest. The authors estimated that a 10 per cent increase in vape prices caused by taxes was associated with roughly a 0.6 to 2.1 per cent fall in youth vape use.
But the same study also found “sizable positive cigarette cross-tax effects” (evidence that some young people substituted cigarettes for vapes), raising concerns that the smoking impact of vape taxes needs to be measured alongside any fall in vaping.
The authors concluded that the unintended effects of vape taxation could “considerably undercut or even outweigh any public health gains”.
China: many who stopped vaping switched to cigarettes
Evidence from China raises the same concern in a different market.
A 2025 prospective observational study looked at changes in vape use after China increased taxes on vapes in 2022. It followed adults who used vapes and found that vape use fell sharply after the tax rise.
But the study also found that many people who stopped vaping switched to conventional cigarettes. It reported that 74.2 per cent of vape users who quit switched to conventional cigarettes, leaving an absolute vape cessation rate of 17.6 per cent.
The authors concluded that the policy’s “effectiveness was diminished” because many people who quit vaping moved to smoking instead.
The study does have limits. It was observational, used an online sample and cannot prove that tax was the only reason people changed behaviour. However, it adds to a pattern seen in other markets, where higher prices for vapes have been linked with increased cigarette use or reduced smoking cessation.
Nicotine pouch taxes: policy ahead of evidence
The same issue is now emerging around nicotine pouches. Nicotine pouches are small pouches placed under the lip to deliver nicotine. They do not contain tobacco leaf and do not involve smoking. They are not risk-free and can be addictive, but they do not expose users to tobacco smoke.
A new U.S. study in Tobacco Control mapped state taxes on oral nicotine pouches and found a highly inconsistent tax landscape.
The study reported that monthly U.S. sales of oral nicotine pouches more than tripled between July 2021 and May 2024, rising from 327 million units to more than 1.05 billion units. It also said they are used by an estimated 480,000 adolescents and 3.9 million adults.
As of December 2025, the study found no federal excise tax on oral nicotine pouches. Twenty-nine states and the District of Columbia did not tax them, while 21 states did.
Among the states that taxed them, seven used specific taxes, such as a charge per ounce or per can, while 14 used ad valorem taxes, based on product price. The rates varied widely. Ad valorem taxes ranged from 10 per cent to 95 per cent. Specific taxes ranged from $0.50 (€0.43) per ounce to $3.08 (€2.66) per can.
The study also found that states differed in whether they taxed pouches containing tobacco-derived nicotine, non-tobacco nicotine, or both. Fifteen states taxed both types, while five taxed only tobacco-derived nicotine pouches. Nevada was the only state that taxed non-tobacco nicotine pouches while exempting tobacco-derived products.
The authors wrote that these differences suggest “there is no consensus” on how to design tax structures for oral nicotine pouches.
This study did not examine whether nicotine pouch taxes push people back to smoking. It was designed to map tax policy, not consumer behaviour. But it does show that tax systems for newer nicotine products are developing before their effects on substitution are fully understood.
The authors said future studies should examine how pouch taxes affect “retail prices, sales and substitution with other nicotine products”.
The effect depends on how taxes are designed
A careful reading of the evidence does not support the claim that every vape tax pushes people back to smoking. Some studies find signs of substitution. Others find that vape taxes reduce vaping without clear evidence of increased smoking in every group.
But the mixed evidence does not remove the concern. It shows that the effect of a tax depends on how it is designed, how high it is, which products are available, and how cigarette prices compare.
A 2026 Health Economics study of U.S. adults who vape found that higher vape prices and taxes reduced vape consumption. Reports of the study said it did not find evidence that higher vape taxes drove adult vapers towards cigarette smoking in that sample.
A 2026 systematic review and meta-analysis in BMC Medicine also found that the impact of vape taxes depends on policy design, market conditions and behaviour by companies and consumers. The review said the effect of taxation was “influenced by tax policy specifics, market conditions, and stakeholder behavior”.
What policymakers should measure
A vape tax is often judged by a simple question: did vape use fall?
The studies above suggest a second question is needed: what happened to smoking?
A fall in vape use could mean some people stopped using nicotine altogether. It could also mean some moved to cigarettes, nicotine pouches, illicit products or other nicotine products.
The South Korean study found spending shifted towards conventional cigarettes when vape prices rose. U.S. evidence among young adults found higher vape taxes were associated with lower vape use but higher smoking.
The Minnesota study found a high vape tax increased adult smoking and reduced cessation. Evidence from China found that 74.2 per cent of vape users who quit switched to conventional cigarettes.
The evidence is not uniform, but the policy test is clear: taxes on lower-risk nicotine products should be assessed not only by whether they reduce use of those products, but by whether they reduce smoking.
The question governments cannot avoid
The policy question is not whether nicotine products should be regulated. They should be. Nor is it whether children should be protected from nicotine. They must be.
The question is whether governments can reduce youth uptake without making cigarettes more attractive to adults who smoke.
For public health, the measure of success should not be whether a vape tax reduces vaping in isolation. It should be whether it reduces smoking.
