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Indiana should learn from Ohio and Kentucky

There are two reasons a state might raise its cigarette tax – to improve health or to produce revenue. Though the latter objective can be the most motivating for some lawmakers, it is the former objective that should inspire Hoosier policymakers to action.

But here’s the catch: small cigarette tax increases, especially those less than $1, do not substantially improve public health, even if they produce new revenue. Smaller tax increases fail to impact consumers because tobacco companies are notoriously skilled at helping their consumers offset small increases with coupons and other discounts.

>> So, it is concerning that Indiana lawmakers are considering a 50-cent cigarette tax increase this year, even as public health and business groups have been asking the legislature to support a $2 increase. Border state comparisons are common around the legislature, so let’s look to our neighbors for some lessons. First, lawmakers should know a 50-cent cigarette tax increase would still leave Indiana with a cheaper tax rate than 3 of our 4 neighboring states. And, Ohio and Kentucky have given us lessons in the ineffectiveness of small cigarette tax hikes.

As bad as Indiana’s smoking rate is, it fares better than two of our neighbors – Ohio and Kentucky, which have the 4th and 2nd highest smoking rates, respectively. Both states have raised their cigarette tax rate more recently than Indiana, so why are they still struggling with high smoking rates?

Well, one likely reason is that the recent cigarette tax increases in Kentucky and Ohio were too small to produce a significant impact on smoking rates. Kentucky last raised its tax in 2018 by 50-cents per pack and Ohio last raised its tax in 2015 by 35-cents per pack.

In 2015, Ohio’s smoking rate was ranked 43rd in the country – 8th worst. Today, six years after its paltry 35-cent increase, Ohio’s smoking rate is ranked 47th in the country – 4th worst. That’s right, Ohio lost ground because its smoking rate declined more slowly than the national average since 2015.

A similar story is unfolding in Kentucky. Following its 50-cent increase in 2018, Kentucky saw a 10 percent decrease in cigarette sales, but its smoking rate still declined more slowly than the national average, keeping the Bluegrass state stuck at 49th in the national rankings.

Unless the objective is to preserve Indiana as an island of cheap tobacco, the evidence from Ohio and Kentucky should lead lawmakers to reject a 50-cent tax increase that will do very little for public health.

There are better models to emulate, even in our region. Minnesota raised its cigarette by $1.60 per pack in 2013 and in the two years following that increase, Minnesota’s smoking rate fell 20 percent faster than the national average. Today, Minnesota’s adult smoking rate is 24 percent better than Indiana’s.

The available evidence is overwhelming, and lawmakers would be wise to heed it. A 50-cent cigarette tax increase would be a mistake at a time when Indiana’s public health challenges demand much more.