Nebraska lawmakers are currently considering legislation that would dramatically increase taxes on cigarettes and vape products. LB 1124 would more than double the state’s cigarette tax, from 64 cents per pack to $1.64, and triple the tax on vape products from 10 percent of wholesale price to 30 percent.
This represents a substantial tax increase on Nebraska consumers and small businesses, and lawmakers should reject it.
Businesses are already under pressure, and raising taxes on products that small, family-owned vape shops, convenience stores, and gas stations rely on for a significant share of their sales would leave many of these businesses struggling. Retailers operating on thin margins, especially those near state borders, would face increased competition from lower-tax jurisdictions and untaxed sources, threatening local businesses and jobs across the state.
Cigarette taxes are also among the most regressive taxes, falling disproportionately on lower-income consumers. In Nebraska, about 28 percent of residents earning less than $25,000 smoke, compared to just 8.7 percent of those earning $75,000 or more, meaning these tax hikes would disproportionately impact lower-income Nebraskans.
Despite conventional belief, higher cigarette taxes do not reliably translate into higher state revenue. Between 2009 and 2013, only three of 32 state tobacco tax increases actually met their projected revenue targets. When tax rates rise sharply, the legal tax base often shrinks much faster than forecasts project. Consumers seek lower-tax options across state lines, purchase products online, or turn to illicit markets, especially in states like Nebraska that are surrounded by lower-tax neighbors.
Needlessly raising taxes on cigarettes and vaping products without any offsetting tax relief elsewhere is a clear tax increase and should be rejected. Nebraska taxpayers are already facing rising costs, and policymakers should be cautious about imposing new burdens on consumers and small businesses.
LB 1124 would do little to provide stable revenue for the state while creating real economic consequences for retailers and disproportionately impacting lower-income Nebraskans. Rather than turning to tax hikes, lawmakers should focus on responsible spending and policies that support economic growth.
Americans for Tax Reform urges all Nebraska Senators to reject LB 1124.
