Momentum is building for an increase that would double Indiana’s tax on a pack of cigarettes.
Oddly, the idea is gaining strength because we need money for roads, not as a way to reduce smoking. But that makes the idea a win-win.
It’s important to spend money on better roads, before driving a car in Indiana becomes more hazardous to your health than smoking.
Through an indirect route, money from a higher cigarette tax would be spent on highways. That’s the plan endorsed by Speaker of the House Brian Bosma, R-Indianapolis, one of the state’s most powerful elected officials.
Bosma wants to spend the extra cigarette tax money on Medicaid benefits. That would allow Indiana to use all of the sales tax on gasoline for better roads.
Medicaid benefits would be a fitting way to spend the cigarette tax money, because smokers cost the state a lot of money in Medicaid.
Bosma’s idea would raise Indiana’s tax on cigarettes from 99.5 cents per pack to an even $2. Estimates say that would bring in around $244 million per year in extra cigarette tax collections.
Before we start planning to spend it all, Hoosier leaders should realize that doubling the cigarette tax might not double the income.
Indiana would lose some cigarette sales that are coming from Illinois and Michigan smokers who cross our border to save $1 per pack. At $2 per pack, our tax rate would be virtually identical to theirs.
Indiana would lose income because southern Indiana residents will be more likely to cross the Ohio River to buy smokes in Kentucky, where the rate is 60 cents per pack.
Finally, and most importantly, Indiana should lose income because a higher tax would encourage some Hoosiers to quit smoking.
Roads or no roads, a potential reduction in smoking is reason enough to raise Indiana’s cigarette tax.
Let’s count the reasons to raise the tax:
• With approximately 22 percent of Hoosiers smoking, Indiana ranks 11th-highest of the 50 states in smoking rates. The national average is only 17 percent.
• Indiana’s cigarette tax ranks 34th-highest among the states. At a new rate of $2, it would be tied for 12th-highest.
• Indiana’s health-related expenditures directly caused by tobacco use are reported at $2.93 billion yearly, including $487 million in the state Medicaid program. It’s only fair that smokers pay for what they use in Medicaid, and the tax increase would go only halfway.
We should give a share of the extra cigarette tax money to Indiana’s tobacco prevention and cessation program. It once received $35 million per year, but budget cuts have trimmed it to $5.8 million.
Indiana needs to get serious about reducing its high smoking rate, which raises costs for both employers and taxpayers.
The effects of a tax increase on smoking are the subject of disagreement. Anti-smoking organizations point to statistics that predict a significant reduction in smoking from a tax increase as hefty as $1 per pack.
Doubters say we’ve already cut adult smokers down to a group that will persist stubbornly at smoking even if the tax goes up.
The greatest hope for the impact of a tax increase lies with teenagers who haven’t become addicted to smoking yet. They’ll feel the $1 per pack more than others, and maybe they won’t take up the habit. Studies show that if a person can get to age 20 without smoking, he or she probably never will start.
A cigarette tax increase will land hardest on Hoosiers with the lowest incomes. One national study shows that among people who live below the poverty line, 26 percent of adults smoke. The rate is only 15 percent for adults who live above poverty level.
But a tax on cigarettes may be the easiest in the world to avoid. All you have to do is stop an unnecessary behavior to save on taxes — and you can live a longer and healthier life as a bonus.