Key points:

• Legislative Bill 170, proposing increased taxes on cigarettes and vapes to fund property tax relief, failed to advance in the Nebraska Legislature.
• The bill aimed to raise cigarette taxes from $0.64 to $1.36 per pack and increase vape taxes to 40% of the wholesale price.
• Opponents argued the bill would disproportionately affect low-income residents and lacked sustainable solutions for property tax relief.

Nebraska’s Legislative Bill 170, which sought to alleviate property taxes through increased taxes on nicotine products, failed to secure the necessary votes to overcome a filibuster in the state legislature.

The bill, introduced by State Senator Tom Brandt, proposed raising the cigarette tax from $0.64 to $1.36 per pack and increasing the wholesale tax on electronic nicotine delivery systems (ENDS) to 40%.

The proposed legislation aimed to generate approximately $80 million annually, with $60 million from the cigarette tax hike and $15 million from the vape tax increase. An additional $100,000 was expected from a 20% tax on online purchases of cigars and similar products.

The funds were intended to provide property tax credits, particularly benefiting local K-12 school districts.

Supporters of the bill, including Senator Jana Hughes, argued that the tax increases targeted “optional” goods and services and were necessary to provide relief to residents burdened by high property taxes. “We are so dang lazy we can’t even go to the McDonald’s drive-through by ourselves to go pick up our food,” Hughes remarked. “We hire someone to pick it up, and that’s a service, and we’re not even talking about taxing that service.”

The bill did face bipartisan opposition. Critics contended that the tax hikes would disproportionately impact low-income individuals and questioned the sustainability of the proposed relief. State Senator Brad von Gillern likened the bill to “putting dollars into the top of a bucket that has a hole in the bottom of it,” expressing concerns about the effectiveness of the measure in addressing the underlying issues of property tax burdens.

Governor Jim Pillen, who had pledged to keep property taxes flat, now faces challenges in fulfilling that promise. With the failure of LB 170 and limited time left in the legislative session, alternative solutions for property tax relief remain uncertain.

For the nicotine industry, the rejection of LB 170 means that, for now, there will be no changes to the existing tax structure on tobacco and vape products in Nebraska.