Smoking and Vaping: The Cost to Indiana

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 12^th 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.