R Street Institute Senior Fellow Smith on nicotine taxes: ‘Tax policy should be guided by science, not the assumption that all nicotine is the same’

Jeffrey Smith of R Street Institute said in a March 3 report that New York should reject Gov. Kathy Hochul’s proposed 75% wholesale tax on nicotine pouches, arguing that when states impose “flat taxation” on reduced-risk products, it signals to consumers that officials consider them just as dangerous. 

“Products that deliver nicotine without combustion are fundamentally different. Sweden offers compelling real-world proof. Thanks to widespread use of snus and nicotine pouches, Sweden has cut its daily smoking rate to just 5.3 percent—the lowest in Europe—with 61 percent lower lung cancer death rates. Despite this evidence, states are moving in the opposite direction. Gov. Kathy Hochul’s FY 2027 budget proposal would apply a 75 percent wholesale tobacco tax to nicotine pouches. Tax policy should be guided by science, not the assumption that all nicotine is the same,” Smith said in the report.   

According to CBS6 Albany, New York’s proposed fiscal year 2027 budget would redefine “alternative nicotine products” to include nicotine pouches, subjecting them to the state’s 75% wholesale tax on tobacco products. The change would apply the same tax structure used for cigars and other tobacco items to smoke-free pouches, even though they contain no tobacco and involve no combustion,

The Food and Drug Administration in January 2025 authorized 20 ZYN nicotine pouch products for marketing after determining they were “appropriate for the protection of public health.” The agency said many adult cigarette users could switch completely to the products and reduce exposure to harmful chemicals found in cigarette smoke.

Data cited by the Tax Foundation show New York had the nation’s highest inbound cigarette smuggling rate in 2023, with an estimated 57.9% of cigarettes consumed in the state coming from illicit sources.  

A 2023 study by Rutgers Health found only 16.6% of discarded cigarette packs in New York City bore the required local tax stamp, down from 39.3% in 2011. Researchers said high cigarette taxes have contributed to illicit trade, reducing tax revenue and creating challenges for enforcement and licensed retailers, according to Rutgers Health.

Smith is a resident senior fellow on R Street’s Healthier Communities team, where he focuses on tobacco control and harm reduction, especially the differences between combustible tobacco and reduced-risk nicotine products. Before joining R Street, he worked as a principal scientist at Reynolds American and previously spent two decades in academia teaching and publishing in behavioral neuroscience.