Indiana's Health Will Improve With a Tobacco Tax Increase

Washington, DC — The Campaign for Tobacco-Free Kids strongly supports the proposal by Indiana Governor Frank O'Bannon to increase the state cigarette tax by 50 cents a pack. Gov. O'Bannon's plan would reduce tobacco use among children, boost the state's revenues and head off spending cuts in vital programs that would have resulted because of revenue shortfalls. The governor's proposal is a win-win situation for Indiana — improving the health of Indiana's kids, while also improving the state's fiscal health.

Studies have documented that every 10 percent increase in the real price of cigarettes reduces overall cigarette consumption by three to five percent. Because kids are even more sensitive to price fluctuations than adults, their consumption rates fall even further when cigarette taxes are raised. A 50 cent increase in Indiana's tobacco tax would reduce the numbers of youth smokers in Indiana by 11 percent. In addition, a 50 cent cigarette tax hike would result in 23,000 fewer smoking-related deaths in Indiana, while generating $350 million in yearly revenue and saving $810 million in state health expenditures.

In recent years, two states have enacted increases similar to those proposed in Indiana and reduced tobacco use while increasing tax revenues. Michigan in 1994 increased its tax by 50 cents per pack to 75 cents. This resulted in close to a 21 percent decline in tobacco consumption and an additional $341 million in revenues for the state's treasury. Similarly, New York in March of 2000 enacted a 55 cent increase to $1.11 total, and preliminary results show a 22 percent decline in tobacco consumption and an increase of more than $100 million in state revenues in just the first two months.

Indiana has not raised its cigarette tax since 1987 and trails most of the nation, taxing cigarettes at only 15.5 cents per pack. Only six states have lower tobacco taxes.

Currently, 31.1 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, 32,000 kids become daily smokers and the state spends $1.5 billion on public and private health care expenditures directly related to tobacco use.

We applaud Governor O'Bannon's foresight and leadership. The Campaign For Tobacco-Free Kids urges Indiana's legislators to immediately enact the Governor's cigarette tax proposal. Raising the cigarette tax now will protect Indiana's kids and families, reduce health care costs and save lives.