A legislative proposal to increase Indiana’s cigarette tax by $1—a boost of 100 percent—presents quite a quandary for those of us who generally believe lower taxes are better for the economy.
Advocates say a big cigarette tax hike would lead thousands of Hoosiers to quit smoking. Certainly, we support that end. According to the Indiana State Department of Health, some 1 million Hoosiers smoke. That’s nearly one-quarter of the state’s residents. Smoking rates for adults, youth and pregnant women are higher in Indiana than in the rest of the country.
“Tobacco use is the single most preventable cause of death and disease in the United States, causing more deaths annually than alcohol, AIDS, car accidents, illegal drugs, murders and suicides, combined,” the Health Department says. “The impact of tobacco on Indiana is staggering, costing Hoosiers 11,100 lives each year.”
Smoking also costs Indiana some $3 billion a year in medical costs—about one-sixth of which are picked up by Medicaid, according to the Centers for Disease Control and Prevention. Most of the rest of that is borne by private business.
So, yes. We support efforts to reduce smoking.
But a $1 increase in the 99-cent-per-pack cigarette tax is huge—especially for people who are addicted. Imagine your morning latte and afternoon cappuccino suddenly went up by a buck each. A two-pack-a-day smoker is in for a $730 tax increase annually, one that will largely be used not on the health care they might need someday but on roads and transportation.
Lawmakers might argue that latter point. After all, the House Republican budget unveiled Feb. 15 earmarks new cigarette tax revenue for Medicaid expenses and smoking-cessation programs. But that’s not new money for Medicaid. It would supplant state revenue that’s already spent on health costs.
Using the cigarette tax revenue for existing health programs then frees up $287 million that House Republicans plan to use to fill a budget gap caused by another part of their budget: shifting all the sales taxes collected on gasoline purchases to road funding.
It’s really a shell game of sorts. And it means smokers would bear a larger burden of the cost of roads than anyone else.
A separate bill working its way through the House would increase the gas tax as well as registration fees for all vehicles—part of the same effort to boost spending on roads.
Again, we applaud additional investments in roads and infrastructure. Maintaining Indiana’s highway system is essential to its manufacturing, logistics and distribution base, which is essential to the state’s economy.
But tax increases should be transparent. The proposed cigarette tax hike is not. While we laud the Legislature’s goals, we urge lawmakers to separate these issues and ensure Hoosiers understand just what they’re paying for and how.•
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