Indiana House Republicans Push Second Tax Hike in Four Years

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Posted by Doug Kellogg on Wednesday, March 3rd, 2021, 7:36 PM PERMALINK

The Indiana State Senate will have to stop the latest tax hike scheme to come out of the Indiana House of Representatives in the past four years.

Last week, the House approved a budget that increases taxes overall, on the back of a tax hike on vape and tobacco products.

Only two Republicans voted no, with a handful not voting. A dozen members who promised their constituents they would not vote to increase taxes, voted to do just that for a second time. Their constituents are likely thinking of the old saying, ‘Fool me once, shame on you. Fool me twice, shame on me’.

In 2017, the Indiana legislature approved a significant increase in the state gas tax. This year it is a dangerous tax on vaping, and misguided tax hike on cigarettes.

Increasing taxes on vape products simply means fewer people will switch to vaping from higher risk tobacco products, and small businesses like vape shops will suffer as they try to recover from a pandemic and keep people employed.  

Budget lead Rep. Tim Brown said, “one of the most important things we can do in the state of Indiana to make us a healthier state is to decrease smoking.” In fact, his tax hikes will do the exact opposite.

Reduced-risk tobacco alternatives such as e-cigarettes that are proven 95% safer than combustible tobacco and twice as effective as more traditional nicotine replacement therapies. It is downright irresponsible to hurt people who are trying to quit smoking.

Cigarettes may look like a soft political target, but increasing taxes on them carries multiple downsides – and there is no upside for health.

Data from the National Adult Tobacco Surveys has consistently demonstrated that tobacco tax increases have no statistically significant impact on the prevalence of smoking among those with household incomes of less than $25,000. Seventy-two percent of smokers are from low-income communities.

They also lead to smuggling. According to the nonpartisan Tax Foundation, tobacco taxes in nearby Michigan and Illinois have resulted in 20% of the market consisting of illicit tobacco.

New revenues would be slated to go to Medicaid, but cigarette taxes are notorious for falling short of revenue promises. Missed revenue means gaps that government is loathe to address by cutting spending – meaning they’ll find other taxes to increase to keep spending levels up.

To be fair, a positive from this budget is the expansion of school choice, which empowers parents at a time when the importance of that choice is more clear than ever.

By pursuing these tax increases, Indiana House Republicans are making promises they can’t keep, while breaking the understanding voters have that Republicans will protect their wallets.

Indiana Senators can and should stop their House colleagues from harming themselves, and the taxpayers they represent. The more legislators get used to increasing taxes, the more Indiana will slip from the pro-taxpayer, business-friendly state it has been.  

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