Current status in Indiana
The current tax on a pack of cigarettes in Indiana is $.995. The tax was last raised by $.44 on July 1, 2007. In November 2006, Governor Mitch Daniels proposed a cigarette tax increase of at least $.25 in order to make cigarettes more expensive, using 100% of the revenue for health care initiatives. The Governor’s plan, now referred to as the Healthy Indiana Plan, called for:

• $35 million to restore funding to the Indiana Tobacco Prevention and Cessation Agency (ITPC) at the minimum level recommended by the Centers for Disease Control and Prevention
• $11 million to be allocated to expand the child vaccination program
• All remaining revenue to fund a new health care program for the uninsured

At $.995, Indiana’s cigarette tax is one of the lowest in the Midwest, but higher than Kentucky ($.30) and Illinois ($.98) among the adjacent states. Chicago is home to the nation’s highest cigarette tax at $3.66 per pack (includes state, county, and city taxes).

State Cigarette Tax Rates Around the United States

Health impact

While the most effective way to reduce cigarette smoking is a three-pronged approach that includes a high cigarette tax, a well-funded comprehensive tobacco prevention program, and a strong smoke free air law, a cigarette tax alone is an effective means to achieving a decrease in cigarette smoking. In fact, a 10% increase in the total price of a pack of cigarettes results in a 7% decrease in youth smoking, and a 4% reduction in overall cigarette consumption.

The $.44 increase in the state’s current cigarette tax will result in many positive changes, saving lives and producing revenue. We will see fewer youth start to smoke, more smokers quit, lower consumption among smokers who do not quit, fewer premature babies, and lower health care costs almost immediately.

State Cigarette Tax Increase Would Cut Smoking Rate and Ease Costs

Economic impact

While tobacco use is often viewed as a personal choice, it does have a tragic impact not just on the wellness of its residents, but on the state and local economies as well. Patrick M. Barkey, PhD, of the Bureau of Business Research at Ball State University, published a research paper in August 2005, titled ‘The Economic Impact of Tobacco Use in Indiana’. Barkey’s conclusion states, “the results of this study support a growing body of evidence that suggests that tobacco is more than simply a killer of people. It is also a killer of jobs and wealth. As such, public policies that seek to limit its use have strong justification.”

The Economic Impact of Tobacco Use in Indiana -Final Report, August 2005

Additionally, the Center for Urban Policy and the Environment at the Indiana University School of Public and Environmental Affairs issued a report in November 2006 indicating that an increase in the state’s cigarette tax will cut smoking and cut health care costs.

Public opinion

A poll conducted in January 2007 by Public Opinion Strategies and The Mellman Group showed that two-thirds of Indiana voters favored increasing the state’s cigarette tax by one dollar to fund health and smoking prevention programs. Additionally, 82% of respondents reported that, if Indiana’s tobacco taxes were raised, it would be important or VERY important to them personally that the money be used to fund programs which keep kids from smoking and help current smokers to quit.

January 2007 Cigarette Tax Public Opinion Poll

Key Points of the January 2007 Cigarette Tax Public Opinion Poll

Common arguments against tobacco tax increases

Anytime that a cigarette tax increase is being considered in the legislature, there are a number of common arguments that are used against the increase. The following resource provides a list of common arguments offered against a tobacco tax increase, and the facts and information which can be used to disprove them.

Responses To Misleading And Inaccurate Cigarette Company Arguments Against State Cigarette Tax Increases

Sample letters & talking points

1. Increasing cigarette taxes is a win-win-win for Indiana. Fifteen years of research has shown that as the price of cigarettes goes up, fewer children start smoking, more adults and teens quit, and the state saves money in health care costs.
   • It’s a health win for keeping Indiana kids from becoming daily smokers
   • It’s a health win for to help adults reduce and quit their addiction.
   • It’s a win for all Hoosier because the revenue can be invested into health programs that reduce health care costs for everyone.
   • The CDC’s Guide to Community Preventive Services strongly recommends increasing the unit price for tobacco products as a strategy to increase tobacco cessation and reduce tobacco use initiation by youth.
   • In 2002, the Indiana cigarette tax was increased by 40 cents. This resulted in an overall 18 percent decline in cigarette consumption. At the same time, revenue increased 194 percent.
   • Economic research studies report that every 10% increase in the real price of cigarettes reduces teen smoking by about 7 percent and adult smoking by 4 percent.
   • Youth are up to three times more sensitive to price than adults, and younger adults (18-24) are about twice as sensitive to price than older adults.
   • Smokers in households with a below median income are four times more responsive to price than those in higher income categories.
   • Recent studies conclude that the greatest impact of price increases is in preventing the transition from youth experimental smoking to regular (daily) smoking.

State Cigarette Excise Tax Rates & Rankings

Benefits From A Cigarette Tax Increase In Indiana