Increased cigarette, tobacco taxes proposed

The Revenue Committee heard testimony March 13 that would increase cigarette and tobacco sales taxes.

LB439, introduced by Grand Island Sen. Mike Gloor, would increase the cigarette sales tax from 64 cents per pack to $1.36 per pack. It also would increase the tax on other tobacco products from 20 percent to 31 percent of the wholesale price. Gloor said the increased tax revenue could go far in offsetting the costs of proposed Medicaid expansions, reducing the number of people who smoke and improving the health of Nebraskans.

“In this time of constant discussion of health care, it seems appropriate to steer this revenue to address these significant issues,” he said.

At least 30 cents of the 72-cent increase in revenue, but not less than $28 million, would be allocated to a newly-created Health Care and Human Service Provider Rate Stabilization Fund. The fund would support the reimbursement of service providers. The remainder would be distributed as follows:
• 23.5 cents, but not less than $23.5 million, to the Nebraska Health Care Cash Fund;
• 5.5 cents, but not less than $5 million, to the Tobacco Prevention and Control Cash Fund;
• 5 cents to the Volunteer Emergency Responders Incentive Act;
• 5 cents to the General Fund; and
• 3 cents to the Health and Human Services Cash Fund, doubling the current allocation.

Proceeds from the increase in tobacco tax would be allocated to the Tobacco Products Administration Cash Fund.

David Holmquist, representing the American Cancer Society Cancer Action Network, supported the bill, saying that increasing cigarette taxes is the only proven method of reducing tobacco consumption.

“Every year 2,200 Nebraskans die from tobacco use,” he said. “This is a win for public health because it will dramatically reduce tobacco use.”

Representing the Nebraska Grocery Industry Association, John Cederberg testified in opposition to the bill. He said the tax increase would lead to people crossing state borders to buy cheaper cigarettes.

“It would be expected to quadruple the amount of cigarettes into the state,” Cederberg said. “This is not a reliable tax on which to fund programs.”

The bill includes an emergency clause and would take effect July 1, 2013.

The committee took no immediate action on the bill.