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The Dose

Welcome to The Dose, which tackles the business and economics inside the turbulent world of health care and life sciences in Indiana. Your host is John Russell. To contact me call 317-472-5383.
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Get ready for a smoking-hot debate over cigarette taxes

January 30, 2017

Here's something sure to raise voices around the Statehouse and just about every bar in town.

Is raising taxes on cigarettes a good idea for curbing the high rate of smoking here, or a non-starter in a state proud of low taxes?

In coming weeks, the debate is sure to heat up. Three bills going through the Indiana General Assembly aim to increase taxes on a pack of cigarettes by up to $2 a pack in an effort to reduce the smoking epidemic in Indiana.

Indiana ranks 41st among all states for overall health, and 44th for smoking rate, according to United Health Foundation’s annual rankings.

The high rate of smoking costs Indiana nearly $7 billion a year in health care and lost productivity, claims the lives of more than 11,000 Hoosiers a year, according to a study from the Richard M. Fairbanks Foundation.

Indiana currently charges a tax of 99.5 cents on a pack of cigarettes, ranking the state 34th nationally and below the tax charged by most nearby states. The average state tax is $1.59 a pack, which is in addition to the federal tax of $1.01 a pack.

All three bills have been referred to the House Public Health Committee. Here they are at glance:

HB 1578 (introduced by Rep. Cindy Kirchhofer, Republican of Beech Grove): This bill is supported by a powerful alliance of the Indiana Chamber of Commerce, the Indiana Hospital Association, the Indiana State Medical Association and Anthem Blue Cross and Blue Shield in Indiana. Together, the groups have united as the Alliance for a Healthier Indiana, with a goal of raising Indiana’s low health rankings, which they say make it more difficult to recruit new businesses and professionals looking for a healthy place to live.

The bill would do four things: raise taxes on cigarettes by $1.50 a pack, raise the legal smoking age from 18 to 21, repeal the so-called “smoker’s bill of rights,” and appropriate $35 million a year for tobacco prevention and cessation programs.

“We really feel all four pieces are critical if we are going to turn around the terrible health rankings in our state,” said Bryan Mills, president and CEO of Community Health Network.

The Indiana Chamber said the bill, if passed, would allow employers to screen potential hires for tobacco use, something they now can’t do under the state’s “smoker’s bill of rights.”

HB 1320 (introduced by Rep. Charlie Brown, Democrat of Gary): This bill would raise taxes on cigarettes by $2 a pack. It would split the additional revenue between the medical residency education fund and a “prevention and cessation trust fund” that could be used to encourage smoking cessation, research on reducing tobacco use, and emphasize prevention and reduction of tobacco use by minorities, pregnant women, children and youth.

HB 1490 (introduced by Rep. Timothy Brown, Republican of Crawfordsville): This bill would raise taxes on cigarettes by $1 a pack. It would use the additional revenue for reimbursements of Medicaid providers.

Similar bills have failed in past years, in the face of anti-tax groups and some retail organizations. Last year, the Indiana General Assembly flirted with the idea of raising taxes on cigarettes and gasoline to fund road repairs. But in the end, the state decided to tap budget reserves to fund $800 million worth of road repairs.

A leading opponent of the bills is the Indiana Petroleum Marketers & Convenience Store Association. The group represents 130 companies that operate or deliver fuel to 90 percent of the state’s 3,200 convenience stores. It said raising the taxes could make cigarettes in Indiana more expensive than some nearby states, such as Kentucky, which applies a rtax of 60 cents per pack.

“It’s going to hurt towns all along the Kentucky border, and retailers located along there,” said Scot Imus, the association’s executive director.

He said raising taxes could also create a huge black market, with people driving down to Kentucky, loading up cars and vans with lower-cost cigarettes, and reselling them in Indiana for a profit.

“It’s just hard to believe that Indiana would increase taxes this much, all at once,” he said, “in a move we think would hurt consumers and retailers.”

Smoking or non-smoking? Let the debate begin.

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