South Carolina Senate Bill 519 would establish a lower excise tax rate for heated tobacco products

A version of the following public comment was submitted to the South Carolina Senate Finance Committee Sales & Income Tax Subcommittee on March 10, 2026.

I appreciate the opportunity to share our perspective on why South Carolina should align its tobacco tax structure with the science and pass S.519, which would establish a lower excise tax rate for heated tobacco products (HTPs) than for conventional combustible cigarettes.

Smoking and the limits of conventional cessation

Cigarette smoking remains South Carolina's leading cause of preventable death, with more than 7,200 deaths annually from smoking-related disease. More than 500,000 South Carolinians currently smoke. The tools traditionally deployed to address this problem have disappointed.

For every 100 people who attempt to quit through willpower alone, only three to five remain smoke-free beyond six months. Medically supervised nicotine replacement therapies carry a failure rate exceeding 90%. For the hundreds of thousands of South Carolinians who want to quit but have not been able to do so through conventional means, a different approach is needed.

What are heated tobacco products (HTPs), and how do they differ from cigarettes?

Heated tobacco products heat tobacco to below the point of combustion, generating a nicotine-containing vapor without the smoke, ash, or harmful chemicals produced by burning tobacco. The principal harms from cigarette smoking stem not from nicotine itself-which is addictive but is not the primary cancer-causing agent-but from combustion and the resulting inhalation of toxic chemicals.

The U.S. Food and Drug Administration (FDA) recognizes a "continuum of risk" across nicotine products, with combustible cigarettes at the most dangerous end. In 2019, the FDA authorized IQOS for sale as "appropriate for the protection of public health" under the premarket tobacco product application (PMTA) pathway, concluding the product produces fewer or lower levels of toxins than combustible cigarettes. The FDA also authorized IQOS to carry a "reduced exposure" modified risk claim, a standard that requires rigorous scientific substantiation.

The case for risk-proportionate taxation

The rationales for taxing cigarettes are well-established: to offset the external costs smokers impose on non-smokers through increased healthcare expenditures, to deter use, and to discourage youth initiation. These rationales do not apply to products that pose a fraction of the risk of cigarettes. The FDA has determined that HTPs provide a net public health benefit.

S.519 applies the logic of the FDA's regulatory framework in the tax code. Under the bill, conventional cigarettes would continue to be taxed at three and one-half mills per cigarette, while cigarettes for heating would be taxed at one and one-quarter mills-a meaningful differential that gives South Carolina smokers a real financial reason to switch to a less harmful product.

The international record on this point is instructive. In Japan, a study by researchers at the American Cancer Society (ACS) found that cigarette sales began to decline substantially in each of 11 regions at the time IQOS was introduced, concluding the product "likely reduced cigarette sales." A separate analysis of Japan's National Health and Nutrition Survey found that cigarette prevalence declined more rapidly in the years after HTP introduction than before, particularly among younger age groups. ACS's own research supports the conclusion that HTPs displace cigarettes when they are accessible and affordable. Sweden, where oral tobacco alternatives have long been available at a lower cost than cigarettes, has the lowest smoking rate and the lowest lung cancer rate in Europe. New Zealand's Smokefree 2025 strategy explicitly embraced safer nicotine alternatives, like HTPs, contributing to a decline in daily adult smoking from 13.2% in 2018 to 6.8% in 2023.

These outcomes are not accidents. They are the product of deliberate policy that aligned price incentives with health incentives.

Tax parity and substitution effects

When safer nicotine alternatives are taxed at similar rates to combustible cigarettes, smokers are less likely to switch to them. An analysis of Minnesota's 95% wholesale tax on e-cigarettes found that the policy led to more than 32,000 additional smokers relative to a counterfactual without the tax. A separate study found that for every e-cigarette pod not purchased due to higher taxes, 1.9 additional packs of cigarettes are sold. These substitution effects are not surprising. Because safer nicotine products are substitutes for cigarettes, policies that price them similarly to cigarettes predictably push consumers back toward the more dangerous product. The American Heart Association acknowledged this in a 2019 scientific advisory, stating that tobacco excise taxes should be highest for combustible products while FDA-approved modified-risk products should be taxed at a lower rate. S.519 is squarely consistent with that recommendation.

Tax parity is regressive

Smoking is disproportionately concentrated among lower-income South Carolinians. When safer alternatives are cheaper than cigarettes, the economic incentive reinforces the health incentive, making switching an attainable option for those who want a viable path away from combustible tobacco. Taxing HTPs at parity with cigarettes removes that incentive and imposes the highest burden on those least able to bear it. High taxes on safer nicotine products are among the most regressive forms of taxation, effectively penalizing lower-income smokers for making a healthier choice.

Youth use and the 2025 National Youth Tobacco Survey

One objection to lower taxes on HTPs is the concern that they will attract youth users. The most current evidence does not support this concern. The 2025 National Youth Tobacco Survey, whose data were released last week by the FDA, found that current use of all tobacco products, including ones such as nicotine pouches and e-cigarettes, which are taxed lower than cigarettes in a majority of states, remains low. Past 30-day use among high school students for e-cigarettes is 7.1% and nicotine pouches 2.3%. These figures are significantly lower than both youth marijuana and alcohol use and reflect the continued decline of youth tobacco use to historic lows.

The FDA's authorization of an HTP also included rigorous marketing restrictions specifically designed to limit youth exposure. The agency's own review of the evidence concluded that "few non-tobacco users would be likely to choose to start using IQOS, including youth." Ensuring that existing age-of-purchase laws apply to HTPs is the appropriate policy response to youth access concerns, not taxing the products at parity with cigarettes in a way that pushes adult smokers back to a far more dangerous alternative.

Conclusion

We respectfully urge the committee to advance S.519. Aligning South Carolina's tobacco tax structure with the FDA's scientific framework, the recommendations of the American Heart Association, and the evidence from comparable jurisdictions is one of the most direct steps the General Assembly can take to reduce smoking-related death and disease in the Palmetto State.