INDIANANPOLIS (AP) — Indiana could increase its cigarette tax for the first time in more than a decade and impose a new state tax on vaping liquids under a proposal taken up Monday by state lawmakers.
The proposal would add $1 to the state’s current 99.5 cents per pack cigarette tax and has the backing of many health organizations and business groups as a way to discourage smoking and reduce Indiana’s high smoking rate.
It also would charge a 39% tax on the liquids used in e-cigarettes, which bill sponsor Republican Rep. Julie Olthoff, of Crown Point, said would be roughly equivalent to the cigarette tax.
Bryan Hannon, an American Cancer Society lobbyist, told the Indiana House Public Health Committee that increasing the cost for vaping was needed so that it didn’t become more appealing to cigarette smokers.
“The importance of tobacco tax parity in public health is to make sure when you raise the price on one tobacco product, you’re raising the price on other tobacco products so as not to encourage switching,” Hannon said.
Some supporters want an even greater increase of $2 per pack in the cigarette tax.
Indiana Chamber of Commerce President Kevin Brinegar argued the state’s high smoking rates increased health care costs for businesses and hurt Indiana’s economic competitiveness.
Indiana’s 21.1% smoking rate among adults was the 4th highest in the country for 2018, according to the federal Centers for Disease Control and Prevention. Nationwide tracking by the Campaign for Tobacco-Free Kids lists Indiana’s current cigarette tax as the country’s 39th highest, falling below all neighboring states.
The Indiana House last backed a $1 per pack increase in 2017, only to see the move fail as the state Senate as Republican Gov. Eric Holcomb also opposed it. Previous attempts to implement a vaping products tax have also failed in the Republican-dominated Legislature.
Donald Rainwater, who was the Libertarian candidate for governor last year, urged lawmakers to consider the “adverse economic outcomes” for business that have struggled during the COVID-19 pandemic if the tax hike was to cut their sales of cigarettes and vaping products.
No one from the Holcomb administration spoke during Monday’s committee hearing, but the governor’s top health adviser said during the state health department’s budget hearing last week that lawmakers should make any cigarette tax increase large enough to be “worthwhile” and noted Indiana’s status with the region’s lowest tax.
Indiana saw a 20% decrease in the consumption of cigarettes following its 2007 tax increase of 44 cents per pack, state Health Commissioner Dr. Kristina Box said.
“Most importantly, what we saw was a decrease in new starts in our most vulnerable population, like our pregnant patients,” Box said.
Some Democrats on the House health committee questioned why more of the nearly $290 million in estimated revenue from the cigarette and vaping taxes wasn’t being directed to health programs. A legislative report projected that more than 60% of the money would go to the state’s general fund and pension programs, with much of the remainder split between several health programs.
Republic Rep Brad Barrett of Richmond, the health committee chairman, said he agreed the committee should weigh in on possible uses for the tax revenue and that he expected it would consider amendments to the proposal next week.