The Nebraska Legislature has rejected proposals to increase taxes on cigarettes and vaping products, despite facing a $125 million budget shortfall. Lawmakers debated raising the cigarette tax to $1.64 per pack and increasing vape levies but ultimately failed to secure enough votes, forcing them to consider cuts to Medicaid, education, and environmental programs instead.
The Nebraska Legislature is locked in a tense fiscal standoff. On Wednesday, senators voted down a proposal to increase taxes on cigarettes and other tobacco products, leaving a gaping $125 million hole in the state's budget. The failed measure, LB1124, originally sought to hike the cigarette tax from 64 cents to $1.64 per pack, a move projected to generate approximately $45 million annually.
The debate highlighted a sharp ideological divide over how to balance the state's books. Supporters like Senator Mike Moser framed the tax increase as a necessary evil to avoid painful cuts elsewhere. He challenged his colleagues to find alternative solutions, warning that without new revenue, the state might have to slash the property tax relief fund or implement an across-the-board 3% budget cut.
Appropriations Committee Chair Senator Rob Clements laid out the grim reality of the alternatives. If the tobacco tax revenue is off the table, the legislature may be forced to strip $71 million from Medicaid, raid the Environmental Trust fund for $27 million, or cut $50 million in state aid to schools—a move that would inevitably drive up local property taxes.
However, opposition was fierce. Senator Bob Andersen argued that the tax hike was merely a symptom of the state's spending problem, labeling it "more money out of taxpayer pockets." Senator Tanya Storer, drawing on her ranching background, used a drought analogy: "You can't feed your way out of a drought," implying the state needs to "cull the herd" by cutting costs rather than buying more "feed" through taxes.
Critics also attacked the proposal's regressive nature. Senator Danielle Conrad pointed out that higher tobacco taxes disproportionately penalize lower-income Nebraskans, who make up a significant portion of the smoking population. Senator Machaela Cavanaugh suggested pausing planned income tax cuts for high earners instead of burdening smokers.
In a last-ditch effort to salvage some revenue, senators amended the bill to strip out the cigarette tax increase, leaving only a tax hike on vaping products. This slimmed-down version would have raised an estimated $7 million a year. Yet, even this compromise failed. The final vote garnered only 31 supporters, falling two votes short of the 33 needed to end the filibuster and pass the bill.
With the tax revenue option now dead, the legislature faces a difficult week ahead. Debate is scheduled to resume on Monday, where senators must now consider deep cuts, fund transfers, and potentially draining another $130 million from the state's cash reserve to balance the budget.
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