Indiana smokers will face sharply higher cigarette costs starting Monday as the state implements its first tobacco tax increase in nearly two decades, raising the levy from $1 to $3 per pack. The increase, taking effect July 1 alongside a routine annual gas tax bump, represents a major policy shift for Republican lawmakers who had long resisted such measures.
The tobacco tax hike, which also applies to vaping products and other nicotine alternatives, is projected to generate $400 million annually as Indiana grapples with a $2.4 billion budget shortfall. The price of cigarettes is expected to average $11 per pack after the increase, according to the Indiana Chamber of Commerce.
State officials framed the tax increase as both a fiscal necessity and public health victory. Senate President Pro Tem Rodric Bray acknowledged the dual benefits, stating the policy "is going to help persuade people either not to start smoking or to stop smoking at the same time"1.
The American Lung Association's Mike Seilback called the measure "a win-win-win," noting that higher prices discourage tobacco use while current users may use the cost increase as motivation to quit2. Indiana currently has the eighth-highest smoking rate nationally, with tobacco contributing to more than 11,000 deaths annually in the state3.
Business leaders have long supported the increase. "A healthy state is good for business," said Vanessa Green Sinders, president of the Indiana Chamber of Commerce, which has advocated for higher tobacco taxes for 15 years4. Research shows Indiana employers pay $3.1 billion annually in smoking-related costs from absenteeism and healthcare expenses5.
Meanwhile, Indiana's gasoline excise tax will increase by one cent to 37 cents per gallon, continuing an automatic annual adjustment established in previous legislation1. According to Indiana Department of Revenue calculations, drivers will pay 17.5 cents per gallon in sales tax on gasoline for July, bringing total state gas taxes to 54.5 cents per gallon2.
The tobacco tax faced initial resistance from Republican legislators but gained support as budget pressures mounted. The measure passed in April as part of the state's two-year budget after lawmakers struggled to close the revenue gap3.
Carrie Arblaster of the Campaign for Tobacco-Free Kids praised the legislation, saying it will "prevent 7,000 Indiana kids from becoming smokers" and encourage 32,400 adult smokers to quit4. The tax increase represents the first change to Indiana's cigarette levy since 2007, when it was last raised to $1 per pack5.
