Indiana Approves Major Tobacco Tax Hike in Budget

Indiana lawmakers have approved a $46.2 billion two-year budget that raises the cigarette tax by $2 per pack and increases taxes on all tobacco products, including vapes, in response to a sudden $2.4 billion revenue shortfall. The tax hike, the state's first in nearly 20 years, is expected to generate $850 million over two years but comes alongside at least 5% spending cuts for most state agencies and higher education. The budget maintains full funding for pensions, debt, Medicaid, and public safety, and provides a modest increase for K-12 education, while keeping planned income tax reductions. Lawmakers said the tobacco tax increase aims to both generate revenue and reduce smoking rates. Democrats had pushed for similar measures, as well as delayed tax cuts and alcohol tax hikes, but most of their proposals were not adopted. In Louisiana, lawmakers approved a vape tax increase but rejected raising the cigarette tax, highlighting differences in state approaches to tobacco taxation.