Zach Wendling
LINCOLN — State lawmakers took another step Wednesday toward cracking down on nicotine and “nicotine-like” products in Nebraska, advancing a bill to add a 20% wholesale excise tax on alternative products.
The Legislature voted 41-0 to advance Legislative Bill 9, from State Sen. Jana Hughes of Seward. It would define “alternative nicotine products” and “nicotine analogues” in state law. Hughes’ goal is to target all future products rather than requiring specific legislation each time.
“Next year, when the new product comes out, we don’t have to bring back a bill to grab on to that new product,” Hughes said during debate. “It’ll automatically fall under our regulation.”
An ‘umbrella’ approach
The change would capture nicotine pouches like the brand Zyn, creating an “umbrella” for enforcement that Hughes said is needed to help curb youth usage of the drugs, while generating revenue.
Currently, such new products are taxed the same as other taxable products — a generic statewide 5.5-cent sales tax rate, plus local sales taxes.
If passed, Hughes’ latest bill would take effect Jan. 1. It is estimated to bring in $3.4 million in the first two fiscal years, by June 30, 2027.
Hughes has pushed multiple bills in her first two years to increase or add taxes and regulations to nicotine products, namely vaping. She has a separate bill this year, LB 712, to change the state excise tax on vapes to 40% wholesale effective Oct. 1, rather than a lower two-tiered rate.
That proposal is estimated to bring in $56.4 million by the middle of 2027.
Both efforts could be key in helping plug the state’s projected budget shortfall or help cover some costs of Hughes’ 2025 priority bill, LB 303, to help lower property taxes by directing more state dollars to K-12 schools.
Former State Sen. Lou Ann Linehan of the Elkhorn area proposed an alternative nicotine products tax at 10 cents per ounce during last year’s summer special session, but it ultimately wasn’t adopted.
Hughes at the time said she planned to look at such a tax in the interim. As she repeated Wednesday, the proposal shifted toward a wholesale tax as a more “fair and equitable” approach. She said a weight-based tax could incentivize companies to concentrate nicotine, which could hurt children the most.
“This would be short-sighted and potentially dangerous to the customer,” Hughes said. “We don’t want to do it by weight, because it is a chemical substance.”
Rejected lobbyist push
State Sen. Jane Raybould of Lincoln proposed an amendment to move to the weight-based tax anyway, echoing concerns of some tobacco lobbyists that the 20% wholesale tax could equate to a 700% tax increase on some products, which she said would be “regressive.”
Raybould’s amendment sought the same tax rate as snuff: 44 cents per ounce. Raybould said it didn’t make sense that the bill went to the General Affairs Committee and not the Revenue Committee, or that alternative nicotine products shouldn’t be taxed more than snuff or cigarettes. General Affairs has general jurisdiction over topics such as alcohol, tobacco, marijuana and gambling.
“Imposing taxes on products designed to reduce smoking-related harm really might even deter harm-reduction efforts and drive consumers to riskier behaviors,” Raybould said. “I know Senator Hughes and I are not fans of vaping, either. But I just want to make sure that we’re looking at this fairly.”
State Sen. Brad von Gillern of the Elkhorn area, Revenue Committee chair, said the committee destination critique was a “red herring” intended to distract. He said nothing would have changed and argued the lobby had “shopped” the amendment as early as Wednesday morning.
“Clearly, it’s nothing that Senator Raybould has been working on or considering for some time,” von Gillern said.
Hughes pushed Raybould on where she got her amendment. Raybould said she brought it “on behalf of one of our industries that advocate the lobby for these issues.” Pressed further, Raybould added it was “one that deals with tobacco products.”
Hughes specifically asked whether the change came from Philip Morris International, a multinational tobacco company with products sold in over 180 countries, including Marlboro cigarettes. The company is represented in the statehouse by Nebraska Strategies, a local lobbying firm.
Raybould told Hughes: “Perhaps … but I don’t feel comfortable sharing the name with you, if that’s OK.”
Raybould similarly declined to answer a reporter’s question on the lobbyist’s identity.
Her amendment failed 24-5, with just Raybould and State Sens. Beau Ballard of Lincoln, Carolyn Bosn of Lincoln, Mike Jacobson of North Platte and Dave Murman of Glenvil in support.
LB 9, one of this year’s two General Affairs Committee priority bills, will have two more rounds of debate.