Higher cigarette tax in Indiana sends smokers across the river for cheaper packs

LOUISVILLE, Ky (WDRB) — One of the unintended consequences of Indiana’s higher cigarette tax is that more smokers are crossing the Ohio River to buy their cigarettes in Kentucky.

Lee Peterson lives just across the river in Indiana, but makes the trip to Kentucky once a week to stock up.

“How much is a carton now here? Seventy-three dollars,” Peterson said. “I pay close to $140 in Indiana.”

That’s nearly double the price. In Indiana, about $30 of the cost of a carton comes from cigarette taxes. For smokers like Peterson, that means Kentucky’s prices amount to a 50% discount. The Kentucky cigarette tax is $1.10.

“I’m sure most of their customers are from Indiana,” he said.

The steep price difference comes after Indiana lawmakers approved a long-debated increase in the state cigarette tax the first since 2007. The tax went from 99 cents per pack to nearly $3, a move designed to discourage smoking and raise state revenue.

So far, both have happened. According to the Indiana Department of Revenue, cigarette tax collections are up by $188 million this year — about three times higher than previous years.

Miranda Spitznagle, director for the Tobacco Prevention and Cessation Commission at the Indiana State Department of Health, said the state’s Quit Now program has also seen a boost.

“In the first three months since the tax took effect, we’ve seen an increase in enrollment of 38%,” Spitznagle said.

Public health officials estimate that for every life lost to tobacco use — more than 11,000 Hoosiers each year — there are another 30 Hoosiers living with a chronic health condition caused by tobacco use.

When lawmakers considered the increase, a state study predicted that raising the tax by one dollar could keep 9,000 kids from starting to smoke and cut overall smoking by 12%.

But for Indiana retailers, the results are mixed.

“I’m not selling Marlboro,” said Shasin Patel, a tobacco wholesaler in Floyd County. “We just sell generics now.”

Patel said cigarette sales have dropped sharply, forcing him to diversify.

“There are plenty of other things to sell in this market — especially general merchandise,” he said.

For the state, the new tax is paying off. For border-town retailers, it’s a tough adjustment — as more Hoosiers cross into Kentucky to light up.

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Higher cigarette tax in Indiana sends smokers across the river for cheaper packs