Indiana Residents’ Proposed Cigarette Tax Hike Will Only Boost the Black Market

Indiana lawmakers are being pressured to hike the state’s cigarette tax by $2 per pack, with some advocates urging to add e-cigarettes to the list of impacted products. The idea is to disincentivize smoking while generating nearly $350 million a year in tax-related revenue. With this money, the Raise It for Health coalition argues, the state would finally have enough revenue to address the health of residents while saving lives.

But despite the campaigners’ enthusiasm for the idea, smokers are known for not smoking fewer cigarettes when prices rise. Instead, they either ignore the hikes or find different ways to get their hands on nicotine products — and that includes resorting to the black market.

Hoosier Campaigners: “Teens Are Dying”

A supporter of the tax increase pointed out recently that the Hoosier state ranks 11th among the states with the highest adult smoking rate. Furthermore, she wrote, cigarette-related health care reportedly costs the state $2.96 billion.

Faced with these numbers and with Campaign for Tobacco-Free Kids claiming that Big Tobacco spends over $296 million on marketing across the state, other supporters of the tax hike like University of Indianapolis Kinesiology and Public Health Professor Carolyn Runge also argue e-cigarette use among Hoosier teens is “skyrocketing.”

Big Tobacco’s marketing campaigns, Runge adds, echoing Campaign for Tobacco-Free Kids, are working, making a whole new generation of young Indiana residents hooked on tobacco thanks to fruity and colorful e-cigarettes.

To her, claims that e-cigarettes are safer are dangerous, and people who vape and say they are not smokers are lying to themselves.  

"It's not as different as people like to think it is," said Runge.  She added, “Both smoking and vaping are vehicles to get nicotine in the system."

When arguing that state lawmakers should add e-cigarettes to the list of products impacted by the tax hike, she explained that the added cost would likely make the habit more expensive for teens as e-cigarette pods now “cost much less than regular cigarettes and they aren't even included in cigarette taxes." That alone could help prevent teens from dying in the future from the consequences of nicotine exposure.

But by marrying the idea of a tax increase to the image of teens getting hooked on substances that will eventually kill them, campaigners like Runge are appealing to locals’ emotions. What we should be discussing instead is how prohibition and all its related policies never work as intended.  

Tax Hikes Won’t Curb Cigarette Consumption

On average, economics professor Don Mathews argues, a 10 percent increase in cigarette prices leads to between a 4 and 8 percent overall sale drop. In addition, smokers are often willing to find ways around state laws to buy their cigarettes.

When Michigan raised its cigarette tax in 1994, Mathews explains, 20 percent of cigarettes consumed in the state one year later had come from either Ohio or Indiana. But crossing state lines for cigarettes is not the only option, as consumers may go to the black market for their needs. What happens then? Consumers will be exposed to more harmful products.

As soon as Hoosier lawmakers pass a tax hike, it’s not far-fetched to assume based on past evidence that local smokers — teens included — would either ignore the hikes, go somewhere else for their nicotine fix, or resort to the black market or the internet, especially if they are in the lower income brackets. So instead of shielding young consumers from the dangers of cigarette smoking, lawmakers will only be fueling the black market and actually putting the poor in greater danger.

What’s worse, this push for a tax hike is being sold under the guise of public safety and concern for the health of Indiana’s youth by people who are, at least on the surface, well-intentioned.

How will they feel about themselves a few years from now when they learn their push for a tax hike gave the black market a boost?

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Chloe Anagnos

Chloe Anagnos is AIER's Publications Manager. She is a writer and digital marketer and has been an AIER contributor since 2017. Her work has been the subject of articles in FOX News, USA Today, CNN Money, and WIRED. She has been a writer, commentator, and panelist for media outlets around the country on subjects like political marketing, campaigning, and social media. Follow @ChloeAnagnos.