February 11, 2025
The Honorable Travis Holdman, Chairman
200 W. Washington St.
Indianapolis, IN 46204
Dear Chairman Holdman and Members of the Senate Tax and Fiscal Policy Committee,
On behalf of National Taxpayers Union (NTU), the nation’s oldest taxpayer advocacy organization, I write to offer comments in support of the provisions in SB 453 pertaining to the taxation of heated tobacco products (HTPs).
Specifically, I would like to express support for the differentiated tax rates for combustible and heated cigarettes. SB 453 distinguishes between these two tobacco products, applying a lower tax to FDA-authorized heated cigarettes, which reflects an understanding of the benefits of smoke-free alternatives to traditional cigarettes and the lower health risks that consumers of these new products incur. NTU strongly supports this policy and respectfully recommends that the language be broadened to include all HTPs, not only those in cigarette form. This would be more reflective of a technologically evolving marketplace in which new harm-reducing products are being developed.
It is clear that HTPs are innovative solutions for smokers transitioning toward significantly less harmful alternatives. As you probably know, there are new HTPs hitting the Indiana marketplace that do not burn tobacco, resulting in a smoke-free product that releases significantly fewer harmful chemicals. HTPs contain nicotine without the harmful chemicals found in traditional tobacco products intended for smoking.
Encouraging healthy, smoke-free lives is an admirable goal, and these provisions in SB 453 facilitate achieving that long-term goal. Providing an incentive, through lower taxation, to products that expose individuals to less harmful risks is an important step toward improving the overall health of Hoosiers who are trying to stop smoking traditional cigarettes. A 2022 report issued by the Indiana Department of Health shows that 21.8% of Hoosiers smoke cigarettes compared to the national average of 14%. Additionally, 52% of smokers report having attempted to quit smoking in the previous year.
Failure to include the differentiated tax rates of burn and heated tobacco also opens the door for market disruption for small business owners across Indiana. For example, taxing smoke-free tobacco alternatives at the same rate as combustible cigarettes would potentially result in consumers seeking more affordable options in neighboring states such as Michigan and Kentucky, which have already passed legislation that defines HTPs and sets a lower tax rate for them compared to combustible cigarettes.
SB 453 also reflects an understanding of cross-border sales, given that it leaves the combustible cigarette tax untouched—the lowest among neighboring states. Resisting the urge to raise it was a wise call.
In summary, the aforementioned provisions in this bill are a courtesy to public health, that would establish a fair excise tax rate, make Indiana small businesses competitive with those across state lines, and incentivize the consumer to make healthier decisions. Further, not defining or establishing the appropriate taxation of HTPs through legislation will result in the unintended consequence of allowing tax policy to fall into the hands of unelected, bureaucratic regulators.
National Taxpayers Union strongly believes the lower taxation rate for HTPs identified in SB 453 will encourage Hoosiers to live healthier lives by helping those who struggle with smoking addictions. We urge you to stand with taxpayers and support defining heated tobacco products and establishing a reasonable excise tax rate.
Sincerely,
Leah Vukmir
Senior Vice President of State Affairs
National Taxpayers Union