Indiana lawmakers propose using cigarette tax for Medicaid

A House committee made significant changes Thursday to the way Indiana would spend proceeds from a proposal to hike the state’s cigarette tax for the first time in more than a decade and impose a new state tax on vaping liquids.

House legislators revised the measure in committee to direct 40% of Indiana’s cigarette tax revenue toward Medicaid reimbursements for health care providers. That’s a change from the original proposal, which would have deposited a majority of the new revenue generated by the tax hike—estimated to be nearly $290 million a year—into the state’s general fund and pension programs.

The proposal, now headed to the House Ways and Means Committee, would add $1 to the state’s current 99.5 cents per pack cigarette tax. It also would charge a 39% tax on the liquids used in e-cigarettes, which bill sponsor Rep. Julie Olthoff, a Crown Point Republican, said would be roughly equivalent to the cigarette tax.

Olthoff said Thursday she welcomed the change, noting Medicaid covers the health care expenses of eligible smokers. The lawmaker has maintained that the legislation is aimed at reducing Indiana smoking rates. The state’s 21.1% smoking rate among adults was the fourth-highest in the country for 2018, according to the federal Centers for Disease Control and Prevention.

A separate amendment seeking to allocate more of the tax revenue toward public health initiatives was voted down by committee members. The proposal, authored by Democratic Rep. Robin Shackleford, would create a health improvement fund to help the State Department of Health treat and prevent tobacco addiction, drug addiction, diabetes, mental illness, obesity and other health disparities.

Republicans on the committee said they prefer the proposal be reconsidered in Ways and Means, and after more progress has been made on the state budget.