Smoking and Vaping: The Cost to Indiana

Raising the Tax Boosts Our Economy.

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Making Indiana
a Better Place for Business

Indiana’s high smoking and vaping rates aren’t just bad for public health – they’re also seriously damaging our economy. Evidence shows we can save lives and reduce other harmful effects by doing one thing: raising the tax on smoking and vaping products.

The data is clear: A higher price would lower Medicaid and other healthcare costs, save businesses money, and increase state revenue.

The Numbers Tell the Story

When it comes to smoking and vaping in Indiana, the research speaks for itself: Raising the tax on nicotine would be a game-changer for our state.

Raising the tax by $2/pack will save thousands of Hoosier lives and provide an additional $356 million in annual state revenue.

Indiana businesses spend $3.1 billion in smoking-related costs each year.
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Impact of Smoking on Indiana Employers

Smoking Breaks Cost
Smokers Are
Smokers are absent more days than 
non-smokers, costing Indiana employers
Smoking-related healthcare expenses cost Indiana employers $757 million annually.
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Impact of Smoking on Employer Healthcare Costs

Each business pays an estimated
in extra healthcare costs each year for every employee who smokes.
Approximately 45,000 Hoosiers would stop smoking with a $2/pack tax increase.
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Benefits of a $2/Pack Tax Increase

Decrease in youth smoking
Youth prevented from becoming adult smokers
Premature smoking-caused deaths prevented
Indiana saw a 72% increase in adult e-cigarette use from 2016 to 2021.

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Percentage of Adults Using e-Cigarettes

United States
Data from Fairbanks Foundation reports released in 2023.

The Reports

The Richard M. Fairbanks Foundation commissioned four separate research studies about the statewide impacts of smoking and vaping.

Economic Impact
of Tobacco

Eliminating tobacco consumption and production in Indiana would lead to higher personal income, increased employment opportunities, and a larger population.

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The Hidden
Smoking Tax

From extra absenteeism and unsanctioned smoking breaks to excess healthcare expenses, employees who smoke cost Indiana employers billions of dollars each year.

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Impact of Increasing
the Cigarette Tax

As tobacco prices go up, data shows that the quantity consumed goes down.
This can lead to thousands of lives saved and more tax revenue for the state.

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The Vaping Epidemic
In Indiana

Vaping is far from harmless. Indiana’s high rate of e-cigarette use leads to serious health consequences and economic costs for both Hoosiers and the state.

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Let’s work toward a healthier future

The reports show raising the taxes on smoking and vaping would benefit Hoosiers. This would bring an additional $350 million in annual tax revenue and lower Medicaid spending, among many other positive outcomes. A tax increase means healthier people and businesses – and a healthier state overall.

See The Summary Report


Research shows that demand for tobacco products follows the most fundamental law of economics: As prices go up, the quantity consumed goes down (and vice versa). Indiana currently has the 12th-lowest cigarette tax in the nation.

Increasing the tax by $2 per pack is a significant enough increase that it would lead around 45,000 Hoosier adults to quit. Additionally, it would add approximately $356 million to the state’s annual revenue and save about $795 million in long-term healthcare costs.

Increasing the tax by $2 per pack would have a dramatic effect on Hoosiers. Projections show the tax increase would save thousands of lives, prevent kids and teenagers from becoming adult smokers, reduce smoking-affected pregnancies and births, and decrease the number of heart attacks, strokes, and lung cancer cases.

Studies indicate higher prices decrease smoking and vaping across the board – including among youth, who are very price-sensitive due to having no or limited income.

In 2022, nearly 15% of Hoosier 12th graders reported vaping in the past month. Because nicotine impairs youth brain development and disrupts normal lung function – among other negative effects – it is critical to reduce both youth smoking and vaping rates.

Raising taxes on cigarettes and e-cigarettes at the same time may deter smokers from switching to vaping (or increasing their e-cigarette use), and vice versa.

Smoking and vaping severely impact worker health and productivity, costing Hoosier businesses $3.1 billion annually. Employees who smoke:

  • Are absent from work about 2.5 days more than non-smoking employees.
  • Take extra breaks, totaling about 30 minutes each workday, on average.
  • Are approximately 2-4% less productive than non-smoking employees.

Also, because nearly 70% of Indiana workers are covered by self-insured healthcare plans – which means their employer pays for medical claims – Hoosier businesses that are self-insured pay more because of smoking-related health issues.

Research shows reducing smoking rates would boost our economy – increasing the population, the number of jobs, and the amount of disposable personal income per person.

E-cigarettes are far from harmless and can contain as much nicotine as traditional cigarettes – sometimes more. Nicotine impacts youth brain development and can lead to behavior issues, cognitive problems, and mental health challenges. E-cigarette use also disrupts normal lung function, and studies show a connection between e-cigarette use and higher likelihood of chronic cough, bronchitis, and asthma. E-cigarettes may also lead to cardiovascular disease and early death because of their effects on heart rate and blood pressure.

When the reports were compiled in 2022 and 2023, Indiana had some of the highest smoking and vaping rates in the country. We were eighth highest in smoking (along with the 12th-lowest tax) and seventh highest in adult e-cigarette use, which jumped 72% from 2016 to 2021.

While a tax increase is the most effective way to reduce smoking and vaping rates, several other tactics may help, such as health education campaigns, smoke-free policies, and low-cost or free publicly available nicotine cessation resources.

Recommendations for preventing and addressing youth vaping include enforcing “Tobacco 21” laws and banning the sale of flavored e-cigarette cartridges. Additionally, schools and healthcare providers can play an important role in reducing use. For example, schools could avoid suspending or expelling students in favor of connecting them to education and treatment programming, while healthcare providers could include vaping when asking about potential nicotine use during routine visits.

The Richard M. Fairbanks Foundation commissioned four reports from leading tobacco economists Frank Chaloupka, Ph.D., and John Tauras, Ph.D., with the University of Illinois Chicago to research smoking and vaping in Indiana. These reports look at smoking and vaping in Indiana, including the effects on public health and the economy, as well as the projected outcomes of a $2 per pack cigarette tax increase.

Yes. All the reports are available here.

TAX increases are Effective

Research shows a tax increase is the most effective way to help people quit smoking and ensure youth never start. However, care must be taken to prevent a potential economic substitution where e-cigarette use increases because traditional cigarettes have become more expensive.

See The Summary Report