Indiana considers raising cigarette tax to $2 per pack.

(The Center Square) – Indiana legislators debated a bill earlier this week to raise the tax on cigarettes to $2 a pack, a move that would take Indiana out of the ranks of about a dozen states that still have a per-pack tax of less than $1 and bring it into the same league as states that heavily tax smokers with the goal of raising revenue and also getting people to quit smoking.

“It’s been proven that when you raise the price, less people want to pay that and it helps them want to stop smoking,” said Rep. Julie Olthoff, R-Crown Point, the bill’s sponsor, in introducing it to members of the Indiana House of Representatives Committee on Public Health.

The bill would raise the state tax on a pack of cigarettes from the current 99.5 cents to $1.995 and would also impose a $1.50 tax on a bottle of e-liquid, which is used in e-cigarettes, for vaping.

Indiana had originally been looking to increase the state excise tax on cigarettes to $3 per pack, which would have made it the state with the highest cigarette tax in the region, higher than the $2.98 per pack tax in Illinois.

If Olthoff’s bill passes, Indiana’s cigarette tax would be about the same as Michigan’s, which is $2 per pack.

Kentucky’s per pack tax is $1.10, making it the lowest among neighboring states. Ohio’s is $1.60.

Thirteen states in addition to Indiana now have a per-pack cigarette tax that is less than $1: Alabama, Colorado, Georgia, Idaho, Mississippi, Missouri, Nebraska, North Carolina, North Dakota, South Carolina, Tennessee, Virginia and Wyoming.

The highest cigarette tax in the nation is in Chicago, where a $1.18 city tax combined with a $3 Cook County tax and the $2.98 state tax brings the total tax to $7.16 per pack. Evanston, Illinois, has the second-highest per-pack tax in the country, with a 50-cent local tax added on to the Cook County and state tax for a total of $6.48 per pack.

The average cost of a pack of cigarettes in Chicago and Evanston is $13.

The average cost of a pack of cigarettes in Indiana, by comparison, is $6.28, according to the Campaign for Tobacco-Free Kids.

In her introduction of HB 1434, Olthoff cited high rates of cigarette smoking in Indiana and high health care costs to treat lung cancer, asthma, COPD and other illnesses often caused by smoking.

About 21 percent of adults in Indiana smoke cigarettes, according to CDC data from 2018 and more than 11,000 Hoosiers die every year from smoking-related illnesses.

“Smoking costs Hoosiers about $2.9 billion in medical expenses each year,” Olthoff said. “Nearly $590 million of that amount is covered by Medicaid.”

A Democratic representative, Rep. Robin Shackleford of Indianapolis, raised objections to imposing a tax that would hit low-income people the hardest during the COVID-19 pandemic when many people have lost jobs and may be smoking more from stress.

She also questioned why more of the revenue that would be raised by the tax would not be directed to health programs, saying, “Why would we support a tax on cigarettes if only about 30% is going toward health care?”

The fiscal impact analysis done by the state shows the added $1 per pack tax on cigarettes would raise an additional $278 million for the state in 2022 and $294 million in 2023. About 56% of this would go into the state’s general fund and 27% would go into the Healthy Indiana Plan Trust Fund, with smaller amounts distributed to other areas.

The 8 cents per milliliter tax on e-liquids (for e-cigarettes, vaping) would amount to $2.3 to $3.8 million in revenue in 2022, according to the fiscal impact statement. All of this would go into the state’s general fund.

Among those testifying in opposition to the bill were an e-cigarette store owner from Fishers and Donald Rainwater, the Libertarian Party’s candidate for governor in the 2020 election, who challenged Republican Gov. Eric Holcomb from the right, saying he’d been inspired to get involved by the state’s drive to raise the cigarette tax.

In his testimony, Rainwater asked why representatives hadn’t asked how the tax increase would affect small businesses.

“First of all, I would like to say that one thing I have not heard this morning is a discussion of how this taxation would affect the thousands of small business owners in the state of Indiana who over the last 12 months have struggled to stay afloat,” he said, “and if in fact this tax were to reduce the number of packs of cigarettes or the e-liquids that were purchased in the state of Indiana, the adverse economic outcomes for those small business owners and their employees. And that is something that I ask you to consider.”

Rainwater also asked about the purpose of taxation in the state, asking whether it was the job of elected representatives to use a “punitive” tax to try to modify the behavior of citizens.

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