Nebraska lawmakers officially rejected Legislative Bill 1124, a proposal to increase taxes on cigarettes and vape products to plug a $140 million state budget deficit. A last-minute compromise to exclusively tax vapes also failed, leaving the state searching for alternative revenue sources.
Nebraska is staring down a massive financial hole. State lawmakers entered the current legislative session facing a projected $471 million shortfall, a number that quickly ballooned to roughly $646 million following updated economic forecasts. After a series of aggressive cuts and cash transfers by the Appropriations Committee, the deficit now hovers around $140 million. To bridge this gap, some legislators looked toward a familiar target: nicotine consumers. But the effort just collapsed on the legislative floor.
Legislative Bill 1124 initially aimed to hike the state’s cigarette tax by a full dollar—jumping from 64 cents to $1.64 per pack—while simultaneously raising taxes on vaping products. Supporters estimated this could generate up to $50 million to offset rising Medicaid expenses. Nebraska currently boasts one of the lowest cigarette taxes in the nation, making it a prime target for revenue generation.
When the primary bill faced a fierce, two-day filibuster, State Sen. Jana Hughes floated a desperate compromise. The idea? Drop the cigarette tax entirely, but keep the tax hike on vape products to squeeze out an estimated $6 million in state revenue.
Did it work? Briefly, yes. Hughes’ amendment was actually adopted in a 33-9 vote. However, the victory was incredibly short-lived. Minutes later, a cloture motion required to end the filibuster failed in a 31-10 vote, falling two votes shy of the 33 needed. The entire legislative package, including the standalone vape tax, was effectively killed.
What exactly killed LB 1124? A highly unusual political alliance. Progressive lawmakers teamed up with staunch fiscal conservatives. State Sen. Danielle Conrad, who led the filibuster, argued the measure was a deeply regressive tax that balanced the state budget strictly “on the backs of low-income Nebraskans.” On the other side of the aisle, fiscal conservatives like State Sens. Tanya Storer, Jared Storm, and Paul Strommen opposed the bill simply because it raised taxes. As Storer bluntly put it, “We can’t tax our way out of a deficit.”
Some lawmakers also expressed deep distrust regarding where the money would actually go. While supporters promised the new revenue would be locked within Nebraska’s Health Care Cash Fund, opponents pointed to Governor Jim Pillen’s history of sweeping cash funds to balance the budget, arguing future legislatures could not be trusted to protect the money.
The rejection leaves the governor’s administration scrambling. Kenny Zoeller from the Governor’s Policy Research Office warned that without this revenue, Nebraska might face severe “across-the-board cuts.” State Sen. Rob Clements, chair of the Appropriations Committee, floated a grim last-resort option: slashing the state’s $1.08 billion Medicaid budget, noting that taxpayers are currently subsidizing the healthcare costs of smokers.
For now, Nebraska vapers and smokers have dodged a major financial bullet. The state’s budget crisis, however, remains entirely unresolved.
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