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Indiana’s cigarette tax is set to increase for the first time in nearly two decades, following a late April legislative scramble for additional revenue.
Separately, a gasoline excise tax will continue its annual one-cent climb. The changes take effect July 1, with the beginning of the state fiscal year.
The price of a pack of cigarettes is expected to average $11 after the tax jumps from $1 to $3, per the Indiana Chamber of Commerce. Other tobacco and nicotine products will also get pricier.
“We really are pleased that the Legislature and Gov. (Mike) Braun moved forward and approved an increase in these tobacco taxes,” said Mike Seilback, who is the national assistant vice president for state public policy at the American Lung Association.
He called the hike — the first since 2007 — a “win-win-win.”
Rising prices can discourage people from using the products and developing nicotine additions, but current users may also seize on the sticker shock as a reason to try quitting. And those who don’t stop will fill the state’s coffers.
“Most tobacco users want to quit, but nicotine is highly addictive — the average tobacco user tries to quit, you know, seven times before they’re successful,” Seilback said. “By increasing this tax, we expect many Hoosiers to take the opportunity to make another quit attempt and be successful.”
The American Lung Association estimates that 38,000 adult Indiana smokers will successfully quit in response to the tax boost.
The health and other impacts could start hitting within a year.
“It usually starts with less heart attacks,” Seilback said, as well as fewer secondhand smoke-induced asthma attacks. Lung cancer takes longer to develop, but he also anticipated seeing sales flag and quit line calls rise.
That’s a boon for the chamber, which has been pushing an increase for nearly 15 years.
“This is a workforce issue … A healthy state and healthy Hoosiers is good for business,” President and CEO Vanessa Green Sinders said.
She cited a 2020 fact sheet from Indiana’s Tobacco Prevention and Cessation Commission that found workers who smoke each cost their employers an estimated $5,800 more in health care and lost productivity annually than non-smoking workers. Collectively, smoking costs Indiana upwards of $6 billion annually in health care and lost productivity.
A lower smoking rate, Sinders said, improves employee wellness, lowers health care costs and cuts absenteeism.
Change takes effect the sooner people are aware of the tax increases, according to Seilback. Quit line advertising can help.
That’s why the Chamber’s Wellness Council of Indiana on Thursday released an updated version of its Quit Now Tool.
“It’s a much-strengthened playbook designed to help employers act on this unique moment,” Ashley O’Rourke, the council’s executive director, said in a news release.
The web-based platform offers ready-to-use modules and printable course completion certificates. It’s now easier for managers to invite employees online and see their progress. The tool also added accessibility features.
“We feel like this is an important opportunity for us, the Indiana Chamber, to be out there with resources for employers and Hoosiers who, again, see that … $2-a-pack increase, and want to take that next step,” Sinders said.
Seilback warned that the General Assembly’s job isn’t done yet.
He noted the recent proliferation of nicotine pouches and heated tobacco products, particularly among younger Hoosiers.
“This is an industry that survives on addicting their next generation of customers,” Seilback said. “So, unfortunately, the industry is always coming up with new products that aren’t covered by current policies.”
“That’s why it’s so important that the Legislature continues … to make sure that (new products) are taxed appropriately,” he added. “Because we’re not going to achieve the gains we need to, from a public health perspective, if (people) are just switching. We want to make sure that they never start and that current users quit.”
Another increase
Transportation infrastructure will also get a boost after Indiana’s gasoline excise tax hops another penny higher. It’s indexed to inflation, but the annual increase is statutorily capped to a cent.
It will now add 36 cents to the price of every gallon of gasoline.
Sinders said the tax funds roads — and more — that are “really important to the state, to our future economic prosperity.”
The chamber, as the state’s largest broad-based business advocacy organization, has members who like and dislike the increase.
But, Sinders said, “all business cares about infrastructure and wants to make sure that our roads are … funded in a way that kind of sets us up for success, and sets these businesses up for success.”
The gasoline sales tax, which is updated monthly, will increase July 1, too. It’s up by about a cent, and will cost 17 and a half cents per gallon.
Federal gas taxes add 18.4 cents per gallon and there is also an oil inspection fee of one cent.
That brings the total of state and federal taxes per gallon to 72.9 cents.
The Indiana Capital Chronicle is an independent, nonprofit news organization that covers state government, policy and elections.
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