Indiana Nearly Doubles Its Cigarette Tax

Published July 1, 2007

In the closing hours of its 2007 session, the Indiana General Assembly on April 29 passed a cigarette tax to help pay for Gov. Mitch Daniels’ (R) health care plan. Daniels signed it into law on May 10.

Hoosiers will pay an additional 44 cents per pack, with about 33 cents of that tax going directly to Daniels’ plan to subsidize health insurance for lower-income Indiana citizens. Hoosiers will pay a total tax of 99.5 cents per pack.

“What prompted this measure was the extreme number of uninsured Hoosiers, especially the children,” said Jerry Elizabeth Malooley, director of health policy, plan design, and development at the Indiana State Personnel Department.

The House voted 70-29 in favor of the bill, and the Senate voted 37-13 in the midnight hour.

Expanded Plan

Daniels introduced the idea of subsidizing the working poor through raising the cigarette tax last fall. Under the new law, 33 cents per pack will go directly to the governor’s new Indiana Check-Up Plan, which is expected to help 132,000 Hoosiers earning up to 200 percent of the poverty level.

That means individual Hoosiers who earn $20,420 a year or less, and families of four earning $41,300 per year, are eligible. Access to the program will be on a first-come, first-served basis.

Clear Objective

Free-market advocates decried the new law.

“Increasing the tax on cigarettes does not answer our objects of an overall health plan for Indiana,” said Craig Ladwig, president of the Indiana Policy Review Foundation. “In fact, it just adds the onus of socialized medicine to legislative moralizing.”

Ladwig cited a January 25 article by Cecil Bohanon, “I Wish They Just Wanted the Money,” which the Indiana Policy Review Foundation published on its Web site. The article says, in part:

“If the government pays for your health care, then government gets a say in the personal choices that affect your health. Of course, [if] smoking drives up the medical bills paid by the state government, then the state has the right [to] discourage the filthy habit. The full costs of smoking aren’t being borne by the state, but by the taxpayers.

“The governor wants to increase taxes not because he wants your money; he wants to reform your lifestyle,” the article continued. “Frankly, governor, I wish you just wanted the money.”

Judi E. Loomis ([email protected]) writes from Indiana.