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Tobacco use in Indiana is among the highest in the nation and is the driving contributor to the state’s poor health. Increasing tobacco taxes is one of the most effective ways to reduce tobacco use, especially among kids, and tobacco companies know it. Lowering tobacco taxes is one major way for the tobacco industry to protect their bottom line, addict people with cheap products, and keep them addicted
Unfortunately, Senate Bill 382 would reduce tax rates on some tobacco products, including those that are most popular with kids. Tax rates for popular e-cigarette products would be slashed from 25 percent to 15 percent, taxes on some cigars would be capped at 72 cents, and some forms of smokeless tobacco or “alternative nicotine products” – which includes products that are growing in popularity with kids – would be cut.
We urge lawmakers to remove provisions in SB 382 that cut taxes on tobacco products. Reducing tax rates on tobacco provides benefits to tobacco companies at the expense of Hoosier health. KIDS ARE HURT BY TOBACCO TAX CUTS The tobacco tax cuts proposed in SB 382 are on products that are most attractive to youth. E-cigarette use has soared among school-age kids in recent years. As many as 1-in-4 Hoosier high schoolers have used e-cigarette products.[1] Cutting tax rates on these products – and failing to tax them at an equivalent rate with cigarettes – is the wrong approach for the health and wellbeing of kids.
Cigars are the second most popular tobacco product with kids and SB 382 would reduce the tax rate on some cigars, moving from a percentage of wholesale price to a flat $0.72 tax. This tax reduction would apply to cigars with a wholesale price as cheap as $3. Seven percent of Indiana high school kids use cigars, and that percentage is even higher among Black youth.
So called “alternative nicotine products” also receive a tax break in SB 382. These products, which include oral nicotine pouches and lozenges, are currently taxed at 24 percent of their wholesale price, but their tax rate would fall to $0.40 per ounce under this proposal. These products, which are very lightweight and benefit from a weight-based tax, are experiencing rapid market growth. In the first half of 2020, sales of Zyn, a popular oral nicotine product, increased 470% in convenience stores and fully 13% of youth age 15-24 reported using this product in the past 30-days.[2] CREATING PARITY IN TOBACCO TAXES It is important that tobacco taxes apply to all tobacco products at an equivalent rate to encourage people to quit rather than switch to cheaper products. Equivalent tobacco tax rates on all products also helps prevent youth from initiating tobacco use. Carving out lower tax rates for some tobacco products provides preferential treatment for some tobacco manufacturers and sellers, makes administration more difficult, and undermines public health. We urge lawmakers to remove the tobacco tax cuts in SB 382.
[1] 2018 Indiana Youth Tobacco Survey. Indiana Department of Health. [2] https://truthinitiative.org/research-resources/emerging-tobacco-products/what-zyn-and-what-are-oral-nicotine-pouches