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The Indy Chamber has lobbied unsuccessfully since 2018 to raise the state’s cigarette tax, and it is ready to give it another go in the 2025 legislative session.
The chamber held a panel discussion this week to help prime the issue. Employee health care advocates argued that a tax hike would help reduce smoking in the state, generate additional revenue that could be used to help pay down the state’s $1 billion Medicaid shortfall and reduce health care complications that would in turn cut that state’s Medicaid costs.
But state Rep. Brad Barrett, who would hold significant sway over any potential legislation as chair of the House Public Health Committee, said one hurdle a cigarette tax hike would need to overcome is idea fatigue.
“You’re dealing with something, and you’re beating your head against the wall … How many times do you do that?” said Barrett, a Republican from Richmond. “That has been an issue that’s entered into the equation, the fatigue of the idea, although we see the huge benefits that that would have to our state.”
He noted that the state continues to suffer from a nearly $1 billion Medicaid miscalculation that could lead to budget cuts and last year resulted in the stalling of about 20% of the bills sent to his committee.
Indiana’s current cigarette tax is 99.5 cents per pack, which is the 39th lowest tax rate among the states and hasn’t been increased since 2007.
Tax hike proposals in recent years would have increased Indiana’s tax to $2 a pack.
A Richard M. Fairbanks Foundation report says a $2 tax would bring inspire several benefits, including a state revenue increase. The chamber says reducing tobacco use will contribute to an overall healthier workforce by decreasing chronic health issues.
Taylor Hughes, Indy Chamber’s chief strategy officer and chief of staff, told IBJ over email that increasing the tax to $2 a pack could result in $356 million in annual revenue, which could help mitigate the Medicaid shortfall. Long-term healthcare savings could amount to $795 million a year, he said, since smokers typically have higher Medicaid bills.
Jennifer Pferrer, executive director of the Wellness Council of Indiana executive director, told the room of business leaders and employers that supporting this measure will improve the health of their employees, which will in turn reduce their costs over time.
Some estimates say tobacco use results in $7.6 billion in health care costs and lost productivity in Indiana each year. Each additional employee who smokes costs the business an additional cost of $5,800 yearly
“You are the gateway to access for most healthcare,” Pferrer said. “You should take that very seriously.”
Paula Pape, wellness coordinator at Concentra Onsite at Allison Transmission, added that tobacco use also impacts injuries and the time spent on workers’ compensation. She said the habit can increase recovery times, which could lead to companies spending more on time off.
The Centers for Disease Control and Prevention said increasing the price of tobacco products, such as through sin taxes, is one of the most effective methods to curb use. Several states have raised tobacco taxes significantly, including Midwest neighbor Illinois at nearly $3.
“We know that if we have a tobacco tax, we will reduce the tobacco use in the state of Indiana,” Jennifer said.
About 16.2% of Hoosier adults said they were smokers in 2022, according to the Indiana Department of Health. That rate is higher than the national average of 14%.
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This is worse than ‘beating a dead horse’. None of the ‘pros’ outweigh the ‘cons’. Revenue won’t go up because the desired result is prohibition. I think that was tried from 1919-1932. How’d that work out? Blackmarket, dangerous products. NO REVENUE. I’ve always found it interestingly ridiculous that booze is glorified, local beer production, ‘happy hours’, and now DORAs at the same time tobacco smoke in those venues is already prohibited. Drunk driving is a far greater immediate ‘health risk’ than the cumulative effects of smoking, yet alcohol excessive taxation seems to be ‘untouchable’. If anything, processed fast food poses a bigger ‘health risk’ to people of all ages. Regardless, ‘prohibition thru excessive taxation’ is a bad idea regardless of the designated lobby product. The average pack of smokes is already too cost punitive with existing taxation.
This is more total baloney!
Raising the taxes has no downside. If tobacco tax revenue dies go down, then most likely the Medicaid shortfall will go down with less smokers being treated, the economy will be doing better because less sick workers will be more productive.
How is this “idea fatigue”? Maybe it’s really an issue of lobbyist money and that nobody is lobbying to make Hoosiers healthier. Even the healthcare Industry is making money off sicker Hoosiers.
It looks like at least one Hoosier seems to have bought into the lie told by Brad Barret.
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How about a sin tax on ammunition that product causes a lot costs to the State’s economy considering all the damage it does to victim’s and their survivors , families and communities.