Cigarette tax increase considered
Nebraska’s cigarette tax would triple under a bill heard by the Revenue Committee March 4.
LB436, introduced by Grand Island Sen. Mike Gloor, would increase the excise tax on cigarettes from 64 cents per package to $1.99. Of the amount collected, $1.46 would be deposited into the general fund and 37.5 cents or $30.8 million in aggregate, whichever is greater, would be allocated to the newly formed Health Care and Human Service Provider Rate Stabilization Fund. The bill also would direct half a cent or $486,470 in aggregate, whichever is greater, to the Tobacco Prevention and Control Cash Fund.
The Health Care and Human Service Provider Rate Stabilization Fund would be created by the bill to support reimbursements for providers, including those providing services under the Medical Assistance Act, the Children’s Health Insurance Program, the Nebraska Behavioral Health Services Act and the Nebraska Community Aging Services Act.
The bill also would increase the tax on the first owner of tobacco products, other than snuff, from 20 percent to 65 percent.
Gloor said LB436 would provide revenue to offset potential cuts to Medicaid provider rates. In addition, he estimated the bill would persuade 11,000 Nebraskans to quit smoking because of the price increase, which he said would provide $459 million in health care savings.
“Smoking-related disease and illness is the number one public health problem in this state,” Gloor said.
The last time Nebraska raised the cigarette tax was 2002, he said. While the number of packs sold in Nebraska decreased after that, Iowa had no appreciable change, Gloor said, suggesting in-state cigarette use decreased without transferring sales to neighboring states.
Glen Bolger of Public Opinion Strategies testified in support of the bill, citing a survey conducted by his firm that found that 73 percent of likely voters in Nebraska support the cigarette tax increase proposed in LB436. Even 48 percent of smokers supported a tax increase, he said.
Allan Thorson, representing the American Cancer Society, testified in favor of LB436. He said 30 percent of all cancer deaths and 87 percent of lung cancer deaths are related to tobacco.
“Battling tobacco is the single most positive way to eliminate cancer as a major health problem in the United States,” Thorson said, adding that a tax increase would discourage people from starting or continuing to smoke.
Representing the Nebraska Hospital Association, Kim Russel also testified in support of the bill, saying it would help save 9,400 lives and deter 20,000 young people from becoming smokers.
In addition, LB436 would help bolster inadequate Medicaid provider rates, Russel said. Current provider rates cover only 26 percent of costs, she said, and funds from LB436 would help deter physicians from refusing to accept Medicaid patients due to insufficient provider rates.
Dan Johnson of Omaha testified in opposition to LB436, saying it would increase the costs for cigarette stamps, causing wholesalers and retailers to lose $20 million in operating capital.
Dick Cosaert, president of Cubby’s Inc., highlighted the “border bleed” problem in his opposition testimony. When Iowa raised its cigarette tax to $1 in 2007, cigarette retailers experienced a loss of 34 percent in business, he said, and stores close to the border lost up to 50 percent.
Nebraska Candy and Tobacco Association President Ted Stessman also testified in opposition to the bill. The number of cigarette packs stamped in Nebraska has decreased from 3 to 4 percent for the past decade, he said. Raising the cigarette tax would increase revenue only temporarily, he said, and would encourage illegal distribution of tobacco products, which he said already is a $5 billion business.
“[LB436] hurts small businesses, threatens jobs and encourages illegal activity,” Stessman said.
The committee took no immediate action on the bill.
