INDIANA– Facing a significant $2.4 billion budget shortfall, Indiana lawmakers are moving forward with a plan to tax tobacco products heavily. Republican leaders, who previously resisted the idea, unveiled their finalized 2025 budget on Wednesday, which includes the first increase to the state’s cigarette tax in nearly two decades.
Hoosier smokers can expect to pay $2 in taxes per pack of cigarettes, roughly double the current rate. The tax increase will also apply to all other tobacco products, including vapes, e-cigarettes, and chewing tobacco.
State Sen. Rodric Bray (R), Senate President Pro Tem, acknowledged the public health benefits alongside the revenue generation. “Along with the revenue comes a pretty good public policy that is going to help persuade people either not to start smoking or to stop smoking at the same time,” he stated. The anticipated $400 million in annual revenue from the increased tobacco tax is seen as a starting point to address the substantial budget gap.
The finalized budget also includes a range of spending cuts across government offices and agencies. The Indiana Economic Development Corporation is among the departments facing significant reductions. Republican leaders outlined one percent cuts to capital, general government spending, and higher education.
Despite the fiscal challenges, key areas such as the Department of Child Services, the Family & Social Services Administration, and the Indiana Department of Corrections will be fully funded. Education will receive $954 million, with $93 million earmarked for expanding school choice vouchers. Republicans also affirmed their commitment to decreasing the individual income tax rate.
While many Democrats welcomed the inclusion of the cigarette tax, some expressed concerns about other aspects of the budget. State Rep. Gregory W. Porter (D-Indianapolis) criticized the allocation of only $40 million to local public health initiatives.
Republican lawmakers aim to pass the finalized budget quickly, with a vote expected Thursday night. The budget must be finalized by April 29.
