Nov. 16 2001
Washington, DC — Indiana Governor Frank O'Bannon's proposal to increase the state's cigarette tax by 50 cents is a good first step that will reduce smoking, especially among kids, reduce tobacco-related health care costs and raise much-needed revenue to balance the state's budget and fund vital programs. More needs to be done, however, and an even higher tax would bring even more benefits. Lawmakers should go beyond a 50-cent increase and enact an 84.5-cent tax increase to bring Indiana's total tax per pack of cigarettes to one dollar.
Cigarette tax increases are strongly supported by Indiana voters. A poll commissioned earlier this year by Tobacco Smart Indiana found that three out of four Indiana voters support a 50-cent increase in the cigarette tax. In short, higher cigarette taxes are good public health policy, good fiscal policy and good politics and should be enacted quickly into law during the next legislative session.
Numerous studies have shown that increasing cigarette taxes is one of the most effective ways to reduce smoking among both youth and adults. These studies conclude that every 10 percent increase in the price of cigarettes will reduce youth smoking by seven percent and overall cigarette consumption by three to five percent. In recent years, many states have raised cigarette tax rates, and in every case, they have reduced cigarette consumption while increasing revenues to balance budgets and fund vital programs. These states are also reducing the millions they spend each year on tobacco-related medical costs.
Based on these studies, Indiana can expect that an 84.5-cent increase in its cigarette tax would keep 74,400 Indiana kids alive today from becoming addicted smokers, preventing 23,800 premature deaths from tobacco-related disease. Indiana would save $1.4 billion in tobacco-related health care costs, while providing an immediate revenue boost of $556.5 million in the first year alone.
According to the poll conducted earlier this year, support for increasing Indiana's cigarette tax comes from a broad-based coalition of voters, including 80 percent of Republicans, 76 percent of Democrats, and 76 percent of Independents. Voters expressed strong preference for increasing the cigarette tax over other tax increases or spending cuts to vital programs that may be necessary to balance the state's budget. Seventy-one (71) percent of voters favored the state Legislature increasing the tobacco tax to help balance the state budget. Other potential revenue sources received far less support. These included tapping into the state's rainy day fund (55 percent), raising the state sales tax (42 percent), increasing the state income tax (23 percent), and increasing the gasoline tax (10 percent). Hardly any Indiana voters favored cuts in vital programs like education (9 percent), Medicaid (14 percent), and health programs for seniors (9 percent) to help balance the budget.
This level of support closely mirrors the results of Washington State's recent voter-approved initiative to raise cigarette taxes. By a margin of 65 to 35 percent, Washington voters last week increased their cigarette tax by 60-cents per pack. As states across the county faces tough choices because of the economic slowdown, it's clear that increasing cigarette taxes is one of the most palatable solutions for the public.
Currently, 31.6 percent of high school students in Indiana smoke. Indiana's kids buy more than 20 million packs of cigarettes per year. Each year in Indiana, 19,600 kids become daily smokers and the state spends $1.6 billion on public and private health care expenditures directly related to tobacco use. A higher cigarette tax will be a win-win solution for Indiana, helping to address both the epidemic of youth smoking and the state's budgetary challenges.
(More information on the benefits of a cigarette tax increase for Indiana. For even more information, visit our Special Report: Higher Cigarette Taxes.)