Indiana’s current cigarette tax is 99.5 cents per pack, and a perennial proposal would raise it to $2 a pack. (Getty Images)
When a proposal has both a fiscal and health upside you would think it would be popular. But pushes to raise Indiana’s cigarette tax have faltered for years. Now is the time to pull the trigger.
“Indiana is an unhealthy state, and one of the big culprits is Hoosiers’ high tobacco usage. This impacts the productivity of our workforce, healthcare costs and future economic prosperity in our state,” said Vanessa Green Sinders, the Indiana Chamber of Commerce’s president and CEO.
“So, it’s disappointing that raising the state’s very low cigarette tax is again not getting the buy-in needed, especially when you consider that the tax rate hasn’t changed in 17 years and the state has the 11th highest adult smoking rate in the nation,” she said. This is something that we should all be able to agree on.”
Indiana’s current cigarette tax is 99.5 cents per pack, and a perennial proposal would raise it to $2 a pack. A fiscal analysis shows the $1 increase would bring in about $205 million in the first year.
The House has passed it several times, with the Senate blocking it repeatedly. This year, House leadership rightly deferred to the Senate to put that tax into the state budget. And Senate President Pro Tem Rodric Bray at least sounds more open to it than usual.
He acknowledged how lean the revenue and budget picture is for the next years.
“That’s a challenge. We also have other challenges with Medicaid that is continuing to rear its head,” Bray said. “(It’s) probably more on our thought list now than it has been in the past. So yeah, I think it’s part of the conversation.”
He added that lawmakers won’t pass it to simply continue to grow the Medicaid program.
“That’s not productive work for us. So that’s not how we’re going to go about it. But yeah, it is part of the conversation right now,” he said.”
The Medicaid factor
Indiana is drowning in health care costs as its Medicaid budget has exploded at an exponential rate. One of the key priorities for the session is to try to contain those costs.
Senate Republicans passed a bill to reduce Indiana’s Healthy Indiana Plan, which is the Medicaid expansion population added in 2015 under then-Gov. Mike Pence. They have repeatedly implied that these Hoosiers aren’t eligible for the taxpayer-paid coverage.
They call it “right-sizing” the program. That’s just a nice way to say they are taking insurance away from upwards of 250,000 Hoosiers. Poor Hoosiers.
If this tax increase could keep even some of those Hoosiers covered and out of emergency rooms, it would be a win.
The health factor
But the fact is, a cigarette tax increase wins in more ways.
That’s because cigarette taxes have the added bonus of getting people to quit smoking. And this lowers health care costs for all of Indiana.
The American Lung Association said increasing taxes on all tobacco products, including e-cigarettes, is one of the most effective ways to reduce tobacco use, especially among youth. Multiple studies have shown that every 10% increase in the price of cigarettes reduces consumption by about 4% among adults and about 7% among youth.
They advocate a $2 increase per pack.
A 2022 study showed that cigarette smoking rates among adults by state ranged from a low of 6.7% in Utah to a high of 21.0% in West Virginia. Indiana came in at 16.2%.
And what does that ultimately mean? Smoking causes $3.4 billion in health care costs each year in Indiana.
I could go on, but it’s clear Indiana has a real problem. Raising the cigarette tax can reduce that number and help Indiana’s financial picture. I don’t see the downside.
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