Increasing the statewide cigarette tax by three times would affect Nebraska retailers significantly, as the customers would switch to Iowa and Missouri tobacco shops, where they would be able to save nearly $18 per carton, according to state lawmakers.
Mark Whitehead, owner of convenience store chain across the state testified that sales of tobacco products make up 35 percent of total sales. “This business is focused to providing a service an a product to the clients, and cigarettes represent the top-selling product category.”
However, supporters of cigarette tax hike stated that “customers’ exodus” didn’t happen when the tax was increased last time, in 2002 and should not be a major issue now.
They claimed the price hike would encourage thousands of people to stop or never start smoking, in addition to generating approximately $100 million every year in revenue to prevent cuts in such state care programs as health-care and education.
Grand Island Sen. Mike Gloor, the author of the bill said that smoking is the top health issue in Nebraska and needs to be curbed.
Gloor stated he had seen horrible health complications caused by smoking while he was working as a hospital administrator. He said he pledged to himself he would do his best to resolve that problem in case he ever gained the chance.
That resulted in the introduction of Legislative Bill 436, under which the state’s cigarette tax would be increased from 64 cents per pack up to $1.99 per pack. Neighboring Iowa has $1.36 per pack and Missouri’s is home to the nation’s lowest cigarette tax at 17 cents a pack.
Currently Nebraska is ranked 38th among the states in cigarette tax rate. If the increase is approved, the state tax will become 16th-highest. In addition, according to Gloor several states consider increasing the taxes as well.
However, he admitted that in case the Bill 436 is approved, it won’t be only for the reasons of public health, but also for financial reasons, as the state is eager to find sources of extra revenue.
The bill will provide approximately $31 million every year to avoid expected cuts in payments to health-care sector, and nearly $500,000 would be directed to smoking-cessation programs.
Nevertheless the most part – nearly $70 million annually – would be generated for the state budget to help close an approximately $1 billion gap between estimated earnings and projected expenses.
Kearney Sen. Galen Hadley said that the bill and corresponding tax hike would affect low-income Nebraskans more significantly, since more people in this social group are smokers. In addition York Sen. Greg Adams asked if it was fair to hit the minority of residents (around 19 percent) who are smokers with a huge increase.
Gov. Dave Heineman has promised to veto any tax hike, including the cigarette tax. Therefore, supporters would have to collect 30 votes in the Legislature to supersede the veto.