Increase Cigarette Taxes For Public Health and a Productive Economy

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Michael Huber is chief executive officer of the Indy Chamber. Michael Huber is chief executive officer of the Indy Chamber.

Indiana prides itself on being a low-cost state to do business, pointing towards rankings like our #10 spot on the Tax Foundation’s ‘Best State Tax Climate’ for 2018.

But there’s another top ten position that’s bad news – and a growing burden – for Hoosier businesses. Indiana is also among the states with the highest smoking rates, levels of tobacco use that cost employers billions of dollars in added healthcare expenses and lost productivity every year.

We can’t sustain a healthy economy without a healthy workforce, and our smoking habits are sabotaging our business climate.  That’s why the Indy Chamber is part of a growing statewide coalition of corporate and civic groups, social service organizations and healthcare providers calling for a $2-per-pack increase in the state cigarette tax during the 2019 session of the Indiana General Assembly.

We represent thousands of companies across Central Indiana; we’re cautious about tax hikes, and recognize that proposals to raise revenues are typically greeted with skepticism at the Statehouse.  But we join the ‘Raise It for Health’ partnership because we must discourage smoking and boost investments in public health priorities – the case for increasing the cigarette tax is overwhelming.

The human toll of smoking is staggering.  More than 11,000 Hoosiers die every year from tobacco-related causes, as we grapple with rates of chronic respiratory and cardiovascular disease higher than the nation.  Indiana has one of the lowest cigarette excise taxes in the U.S.; by keeping cigarettes relatively cheap, we’re subsidizing the suffering of families across the state.

But let’s focus on the financial consequences: Every time an employee misses work because of illness caused by smoking – or is forced out of the workforce entirely by cancer, emphysema or other severe ailments – it’s an added cost to business.  So are the higher insurance rates paid by employers on behalf of the one-in-five working-age Hoosiers who smoke. 

These costs total more than $6 billion in lost productivity, higher premiums and other economic impacts of smoking.  For lawmakers uneasy about raising cigarette taxes, we argue that this is a more troubling, hidden ‘tobacco tax’ imposed every day on the businesses that create jobs and invest in Indiana.

It’s estimated that raising the cigarette tax would encourage 70,000 Hoosier smokers to quit, and 60,000 children not to start.  If those were the only outcomes, action from the legislature would be worthwhile.

But Indiana also ranks 49th in public health spending, a dismal failure to invest in our most essential homegrown ‘asset’ – our human capital.  We’re behind the nation in infant mortality, preventative care and other key health measures, and are fighting a desperate battle against an opioid epidemic.  As spending lags, smoking exacerbates most of these issues, from childhood asthma to opioid abuse – tobacco is a gateway to other addictions (studies show that 90% of opioid abusers are also smokers, for example).

A $2-per-pack cigarette tax increase would generate $360 million in its first year for programs aimed at these challenges, including smoking cessation.  The cigarette tax is a narrow disincentive to smokers; just as it made sense in 2017 to target gas taxes to build and maintain roads, it’s common sense to tax one of the state’s biggest health crises to address the issues it helps create.

Next year’s session will produce a two-year budget for the state.  By raising Indiana’s cigarette tax to a reasonable level, legislators can invest in the health of the people and employers they represent – an investment with a positive impact on the rest of the budget, from workforce and education to economic development and Medicaid spending.

We urge the General Assembly to ‘raise it for health’ for lower smoking, higher productivity and a more competitive workforce.

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