Raising the cigarette tax in Indiana could provide added incentive for smokers to quit while generating a much-needed boost for funding of public health initiatives.
But Hoosier lawmakers should also consider this: Smoking is legal and shouldn’t be taxed into oblivion. Raising the tax too high would put an outsized financial burden on Hoosier smokers, many of whom are struggling financially during the pandemic.
Twenty-two health organizations have called jointly on the state to hike its tax on a 20-pack of cigarettes from $1 to $3. That seems extreme, considering that Hoosier smokers currently pay an average of $5.75 for a pack. Add two more dollars, and the $7.75 cost would be comprised of 39% excise tax, not to mention the 7% state sales tax.
House Bill 1434, authored by state Rep. Julie Olthoff, R-Crown Point, takes a more reasonable approach. It would add $1 per pack to the cigarette tax. HB 1434 would also impose an 8-cent tax per milliliter on e-liquids containing nicotine.
Olthoff’s bill would nudge Indiana’s cigarette tax closer to the middle of the Midwestern pack. Illinois’ cigarette tax is $2.98, while Michigan charges $2, Ohio $1.60 and Kentucky $1.10. The average state cigarette tax is $1.89.
The $1 increase in Indiana, which hasn’t raised its cigarette tax since 2007, would generate about $175 million in revenue that could be channeled to public health care, where the state’s spending ranks 48th nationally. The new revenue could be used for smoking cessation efforts, as well as other health initiatives to deal with the pandemic and to address Indiana’s litany of health concerns, including maternal and neonatal care.
Studies have shown that the cost of a pack of cigarettes does discourage some smokers from lighting up. Research reported in the publication Epidemiology in 2017 found that a $1 increase in the price of a pack of cigarettes prompts a 20% decrease in cigarette purchases.
The proposed $1 per pack increase in Indiana’s cigarette tax would cost three-pack-a-week Hoosier smokers, who currently pay about $900 a year to support their habit, an additional $160 annually. While that amount wouldn’t break the bank for most, it might be yet another factor encouraging them to quit tobacco.
The stakes are high. More than 1,100 Hoosiers die each year from smoking and about 1,400 die of exposure to secondhand smoke, according to the U.S. Centers for Disease Control and Prevention.
The economic cost of smoking is colossal, as well.
Smoking-related illnesses demand almost $170 billion for direct medical care annually across the country, according to the CDC. Indiana is hit harder than most. Nineteen percent of Hoosier adults smoke, exceeding the national average of 16%.
Given the staggering costs and the need for better funding of public health care in Indiana, the General Assembly should move decisively to pass HB 1434 and raise the cigarette tax for the first time in 14 years.