Indiana chamber calls for increasing the state’s cigarette tax

(The Center Square) – While Indiana lawmakers have gotten behind plans to improve health care in the state, there remains some question on how the state will cover the millions needed to pay for it.

The Indiana Chamber of Commerce is joining with healthcare advocates in calling for an increase in the state’s cigarette tax. Chamber leaders say a $2 tax, more than double the current rate, would cover initiatives outlined in Senate Bill 1, a bill bolstering mental health services, as other aspects of health reforms championed by Gov. Eric Holcomb.

SB 1 passed the Senate unanimously three weeks ago, but aside from receiving a first reading and a referral to the House Committee on Public Health last week, it has not been discussed in the House.

The state chamber said the issue is one of its top priorities. Vice President of Health Care Policy and Employment Law Ashton Eller said last month mental health needs cost businesses across the state $885 million in lost productivity. Providing that care costs the state more than $700 million.

He added the state House will lead discussions on how to fund SB 1, which calls for the state to create a toll-free, confidential helpline and expand the number of mental health clinics across the state.

An increased cigarette tax is a logical way to fund the mental health programs since it and other tobacco products are addictive, Eller told The Center Square.

“It makes sense this session, when we’re dealing with public health, when dealing with addiction, that we would tackle this within the same vein as these issues,” he said.

Indiana’s 99.5-cent-per-pack cigarette tax is one of the lowest in the nation. According to TobaccoFreeKids.org, 38 states levy higher taxes on the product. That includes all the states surrounding Indiana, including Kentucky’s $1.10 tax.

Pushing the rate to $2 a pack would put Indiana in a six-way tie for the 19th highest rate among states, joining Michigan, Alaska, Arizona, Maine and New Mexico. It would also put Indiana above Ohio, which charges a $1.60 per pack tax.

According to the Indiana Legislative Services Agency’s Office of Fiscal and Management Analysis, the state collected $387.7 million in cigarette and tobacco taxes during the 2022 fiscal year. That was down 5.6% from the previous year’s $410.4 million.

More than half of the tobacco tax money goes into the state’s general fund, but 27% is allocated to the Healthy Indiana Plan Trust Fund. Nearly 2.5% of it reimburses Medicaid, and the state’s mental health centers fund gets a .6% cut.

Indiana Chamber President and CEO Kevin Brinegar said raising the tax would also improve the state’s health rankings in addition to funding both mental health needs and Holcomb’s other health care plans included in his Next Level Agenda. United Health Foundation’s America’s Health Rankings 2022 found that 17.3% of Hoosier adults smoke, meaning the state came in 41st nationally.

Brinegar told reporters last week that studies also show states with higher tobacco taxes see smoking rates decline since “smokers are price sensitive,” and it helps people kick the habit. And a higher cigarette tax would also mean Indiana retains more general fund money for education and economic development needs.

“So, we think that would be a nice package,” he said.