Advocates try again to increase Indiana’s cigarette tax

With the 2023 legislative session around the corner, health advocates continue to push the General Assembly to do more to reduce Indiana’s smoking rate, which costs the state an estimated $3.4 billion in health care costs annually, by increasing the cigarette tax.

Bryan Hannon, the American Cancer Society government relations director for Indiana, emphasized the need to discuss an increase to the state’s cigarette tax, which at 99 cents per pack is the 39th-lowest tax rate in the country.

“… There are evidence-based policies that we can pursue to reduce tobacco rates and unfortunately Indiana has not pursued those with any conviction of vigor in the last 16 years. And it shows in the data,” said Hannon, whose organization is pushing for a $2 increase during their 47th annual Great American Smokeout on Thursday.

The Campaign for Tobacco Free Kids reports that Indiana’s adult smoking rate sits at 17.3% in 2022, higher than the nationwide 12.5% rate. For minors, the rates are 5.2% and 1.9% for Indiana and the United States, respectively.

Advocates like Hannon argue the state could decrease its smoking rate–which in turn reduces health care costs for businesses and preventable deaths–by increasing tobacco taxes.

A session primed to focus on the need for more public health funding could boost the argument for increased taxes.

Sen. Pro Tem Rodric Bray, R-Martinsville, said that ways to reduce Hoosier smoking rates would be part of the discussion on public health—an area that one report said would need nearly $250 million in funding.

“We will be taking a hard look at our public health funding this year, including potential changes to our public health funding and infrastructure,” Bray said. “With that in mind, cessation efforts to help curb smoking will certainly be an issue we look at this legislative session.”

Hannon observed that part of that public health spending could be funded by increased taxes, though each issue had merit individually.

He said his organization has pushed for an increase at least since 2016, though legislators have been resistant. The last increase dates to 2007. Indiana’s cigarette taxes per pack rank lower than all of its neighbors.

Vaping tax

Rather, the General Assembly did the reverse in the most recent session, reducing a tax on vaping products from 25% of the wholesale price to 15%, which went into effect on July 1. Sen. Travis Holdman, R-Markle, argued that his bill simply corrected a mistake from the 2021 session that introduced the 25% tax, telling the IndyStar that 15% rate was needed to “create more parity” with other products.

The 15% tax is equal to neighboring Illinois and Kentucky but higher than Michigan, which has no tax, and Ohio, which charges 10 cents per milliliter.

The difference between tax rates on e-cigarettes and traditional cigarettes could make vaping a more appealing option, rather than placing the emphasis on quitting altogether.

“Our preferred approach is that we tax all tobacco products equally,” Hannon said. “The concern there for us is that, in the public health space, when tax policy treats one category of products more favorably than the others, it can encourage switching rather than quitting.”

Some proponents of a lower vaping tax maintain that e-cigarettes are a safer alternative and ease a smoker’s decision to quit. However, not all medical experts agree. The Indiana State Medical Association, a physician membership organization, said more research was needed and teens especially should be discouraged from vaping.

“Like traditional tobacco, e-cigarettes contain toxins and cancer-causing chemicals,” ISMA said in a statement. “The ISMA also strongly supports the ban on the sale and marketing of e-cigarettes and other tobacco products to anyone under 21, and continues to support taxing e-cigarettes at a level equivalent to the tax rate on other tobacco products.”

The General Assembly increased the minimum age to purchase tobacco, including cigarettes and vaping products, to 21 during the 2020 legislative session.

Business leaders also hope that increasing the tax will reduce the state’s smoking rate, therefore decreasing health care costs for employers. But some worry that the state focuses on the revenue aspect rather than the interest in public health.

“The facts are, you increase the cigarette tax, you lower the smoking rate. We’ve seen the evidence on that and we’ve been pushing this for years,” said Mike Ripley, the Indiana Chamber of Commerce vice president of health care and employment law policy. “It’s not what we consider a revenue generator … but it is for the purpose of getting people to stop smoking.”

Hannon noted that an estimated 11,000 Hoosiers die annually due to tobacco- or smoking-related illnesses.

“This isn’t just about a budgetary equation or numbers on a spreadsheet, this is about lives,” Hannon said. “So the longer we wait, the more people will pick up the addiction.”

Indiana falls behind on cessation spending

An IndyStar report from 2019 found that, after leading the nation in tobacco control funding in the early 2000s, monies sharply declined after 2003, covering just a fraction of the recommendations from the Centers for Disease Control and Prevention.

In a post acknowledging that no state meets the agency’s proposed minimum for funding, the CDC observed that states receive money for those very efforts from tobacco settlements and current tax rates.

“In fiscal year 2020, states will collect $27.2 billion from tobacco taxes and settlements in court, but will only spend $740 million in the same year,” the CDC said. “Spending 12% (about $3.4 billion) of the $27.2 billion would fund every state’s tobacco control program at CDC-recommended levels.”

That $740 million, or 2.7% of state collections, pales compared to reported spending from tobacco companies, which annually spends $8.2 billion on advertising. Indiana alone sees $283 million of that marketing, according to the Indiana Department of Health.

A 2014 CDC report found that Indiana should be spending $73.5 million, or 13% of its funds, due to its higher-than-average smoking rates—more than 10 times the current $7.5 million budget to the Tobacco Prevention and Cessation Commission. Prior to 2003, Indiana spent as much as $36 million combatting smoking in Indiana.

“Much like all of Indiana’s public health infrastructure, that tobacco program has seen a precipitous decline in its appropriations,” Hannon said.

In its annual report, the commission reported reaching roughly 75% of Hoosiers in 39 counties, less than half of Indiana’s 92 counties.

Hannon said that while doctors, families and friends played a role in helping someone quit tobacco, the state also needed to provide support for cessation programs.

“We know that many people who use tobacco–they want to quit. The data shows (that) about seven out of 10 cigarette smokers want to quit smoking but it’s very hard to do and they need support,” he said.

The Indiana Capital Chronicle is an independent, not-for-profit news organization that covers state government, policy and elections.