Gov. Dunleavy vetoes Alaska tax on vaping and increase to minimum tobacco purchase age

Alaska Gov. Mike Dunleavy vetoed legislation last week that would have imposed a statewide tax on e-cigarettes and brought the state’s minimum age to buy tobacco into compliance with federal law, raising it from 19 to 21, because the governor thought the vaping tax rate was too high.

The governor cannot veto policy provisions from bills passed by the Legislature; he can only veto dollar amounts from appropriation bills or entire pieces of legislation. In a letter explaining his first veto of a bill in almost three years, Dunleavy said it was not possible to separate out the tobacco age increase from the new tax on vaping, meaning he had to veto the whole thing.

Sen. Gary Stevens, R-Kodiak, had introduced Senate Bill 45 to discourage young people from smoking traditional cigarettes or e-cigarettes. On the last hectic day of the legislative session, the bill passed with strong bipartisan support in the House 31-9 and in the Senate 18-2.

The U.S. Food and Drug Administration has said that e-cigarettes are an “ongoing concern” with 2 million U.S. middle and high schoolers reporting having used them in the past 30 days. The FDA has not approved vaping as a method to quit smoking, and the U.S. surgeon general released a report in 2020 that said more evidence is needed to determine if e-cigarettes help smokers give up.

After a back-and-forth in the state Capitol about the size of the new tax, a 35% rate of wholesale was set in the bill, which is less than half the state tax rate of other tobacco products. The Alaska Department of Revenue had earlier estimated that a 25% tax on e-cigarettes would net the state upwards of $1.2 million in revenue per year.

Stevens said Dunleavy had warned him that if the vaping tax rate was over 25%, the governor would veto the bill. The governor’s office confirmed that is why Dunleavy struck it down.

Juul Labs, a leading e-cigarette manufacturer, joined vaping trade groups in opposing the new statewide tax, arguing that it would push nicotine users to use more harmful tobacco products. A vaping trade association spokesperson celebrated Dunleavy’s veto of the tax on social media.

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Anchorage Democratic Rep. Andy Josephson carried the bill in the House, where the 35% tax rate was successfully introduced. He was surprised by Dunleavy’s decision.

“I’m floored,” Josephson said Friday. “I think that we need to override that veto.”

It would typically take two-thirds of legislators voting together within five days of convening to override the governor’s veto of a bill. But because the Legislature has adjourned its second regular session, it would need to hold a special session to do that.

The veto risks some federal funding: The state Department of Health says that starting Jan. 1, there will be federally mandated tobacco-age compliance checks. If more than 20% of local retailers are found to be violating the federal minimum, the state could lose substance-abuse block grants. For the current fiscal year, that would be up to 10% of $6.4 million allocated to Alaska.

“Under Alaska law, the state is not statutorily obligated to enforce the federal minimum age requirement, but retailers should comply with the federal minimum legal age to purchase tobacco and nicotine products,” said Clinton Bennett, a spokesperson for the Department of Health. “The state will continue to educate retailers about the change in federal age requirements.”