State budget debate will include whether to tax vape products

By MADISON MERRELL

Capital News Service 

LANSING – Michigan policymakers are discussing imposing a new tax on vape products to raise state revenue and deter their use. 

Thirty-four states tax vaping products, making Michigan one of the 16 – and the only Great Lakes state – that does not, said Rachel Richards, a fiscal policy director at the Michigan League for Public Policy. 

According to the U.S. Tax Foundation, Minnesota and Washington have the highest taxes on vape products, each imposing a 95% wholesale tax. Many Midwest states rank among the lowest, with rates around 10% or less. 

Gov. Gretchen Whitmer’s recommended budget for the fiscal year of 2026–27 estimates the revenue generated from a proposed 57% wholesale tax on vape products would be $95 million, said Robert Canell, an economic analyst at the Senate Fiscal Agency. 

If rates increase too much, revenue could fall as consumers purchase less of the products, Canell said. 

Richards said Whitmer’s efforts to fund the state’s share of Medicaid costs would benefit from the proposed tax because her budget recommendations would allocate the revenue to health and wellness programs, including cancer prevention, smoking cessation and other prevention programs.

The governor proposed $8.9 million for smoking prevention, according to Associate Director Benjamin Gielczyk of the House Fiscal Agency. 

However, Richards said that if the Legislature were to enact Whitmer’s proposal, lawmakers could dedicate the vape tax revenue to different uses other than the governor’s recommendation.

The League for Public Policy, an advocacy and research group, recommends “common sense policies” to help keep tobacco and vape products out of the hands of kids. 

Whitmer’s proposed new vape tax and higher taxes on cigarettes and other tobacco products would reduce use by middle school and high school students, along with increasing state revenues and stabilizing funding for health-related programs, according to the league. 

Sarah Wilbur, the communications manager at the U.S. Tax Foundation, said taxing vape products to reduce use can discourage potential new users from taking them up, but also discourages smokers from switching to less-harmful alternatives. 

Wilbur said that to maximize harm reduction, vape products should be taxed at a much lower rate than cigarettes to encourage current smokers to switch.

According to Jodi Rake, the director of Tobacco Free Kids, Michigan ranks 44th for funding levels recommended by the Centers for Disease Control and Prevention for tobacco prevention programs.

Michigan is considered part of the “tobacco nation,” a group of states with higher smoking rates and lower spending on prevention efforts than national levels, according to the National Institutes of Health.