Indiana to raise its tobacco tax by $2 per pack

Indiana will soon raise taxes on tobacco products to help close its budget deficit. Critics say the tax hike will affect lower-income Hoosiers the most and lead to a larger marker for black market cigarettes.

As lawmakers try to patch a projected $2.4 billion deficit in the state's two-year budget, Gov. Mike Braun and several Republican legislators unveiled a finalized version of the state budget that includes the state's first cigarette tax hike since 2007. It passed through both chambers of the legislature early Friday morning.

The change will increase the state’s cigarette tax from $0.995 per pack to $2.995 per pack – a $2 increase.

Republican lawmakers had long resisted the tax hike. However, lawmakers expect it will generate $400 million in tax revenue annually, the report said.

Indiana Senate President Pro Tempore Rodric Bray, R-Martinsville, expects the tax to help revenue in the short term and public health in the long term.

“Along with the revenue comes a pretty good public policy that is going to help persuade people either to not start smoking or stop smoking at the same time,” Bray told reporters this week. “So I think everybody expects that number to decrease over time, but that’s because we’ll have fewer smokers.”

Rich Marianos from the Tobacco Law Enforcement Network disagrees with that logic.

Marianos calls the increased cigarette tax a tax on the poor, noting that 67% of Hoosiers who smoke earn under $50,000 per year.

Additionally, he worries it will fuel a black market of less safe nicotine products.

“The facts show that raising taxes doesn’t change consumer behavior,” Marianos told The Center Square by email. “It just drives sales out of legitimate stores into the streets and over state borders. The state will suffer revenue losses and small business will lose out to neighboring states. Crooks, hijackers, and gang members will score as they smuggle from lower tax jurisdictions. It’s a dumb move.”

When other states have made tobacco less accessible, the black market for it has increased.

Notably, after Massachusetts banned flavored tobacco products in 2019, it saw a 21,000% spike in illegal vape seizures by State Police.

Carrie Arblaster, director of Midwest advocacy programs for the Campaign for Tobacco-Free Kids, applauded the move.

"The evidence is clear that increasing the price of cigarettes and other tobacco products is one of the most effective ways to reduce tobacco use, especially among kids," Arblaster said in a news release. "The $2 cigarette tax increase will prevent kids from smoking, encourage smokers to quit, save lives, and save money by reducing tobacco-related health care costs, which total $3.4 billion a year in Indiana."