LINCOLN — A proposal to increase cigarette taxes to provide property tax relief met with skepticism from some members of the Revenue Committee on Thursday.
State Sen. Jim Smith of Papillion criticized Legislative Bill 1013 for raising one tax to cut another one, calling the idea a tax shift.
Another colleague questioned why smokers should pay so that all property taxpayers get a break.
“We are putting a huge burden on a small segment of the population,” said Sen. Jim Scheer of Norfolk.
But supporters of the bill argued that it would save lives and tackle two of the state’s biggest problems.
Raising the tax by $1.50 per pack would cut health care costs by pushing more smokers to quit, they said.
And the $120 million that would be collected annually from those who don’t quit could address other health needs and ease property taxes.
“LB 1013 is a giant step in the right direction,” said Roger Wiese, executive director of the North Central District Health Department. “The state of Nebraska has an opportunity here to make a huge impact.”
Sen. Mike Gloor of Grand Island, the Revenue Committee chairman, introduced the bill. It is his third attempt to raise the cigarette tax.
As in the past, several health care professionals and advocates spoke in support of the increase at the committee hearing.
This year, they were joined by the Nebraska Farm Bureau, which has been at the forefront of efforts to cut property taxes.
LB 1013 would put an estimated $45 million into the state’s Property Tax Credit Fund and use another $45 million to increase the personal property tax exemption.
An additional $30 million would be added to the state’s Health Care Cash Fund for a variety of health programs.
Bruce Rieker, testifying for the Farm Bureau, said the proposed tax hike would be a way of making smokers responsible for the costs that the state has to bear because of tobacco use.
The American Cancer Society estimates that smoking-related health problems account for $795 million of overall health care costs in Nebraska and $162.3 million of the state Medicaid budget.
Smoking also is responsible for half of the preventable deaths in the state, said Ali Khan, dean of the College of Public Health at the University of Nebraska Medical Center.
But convenience stores, grocers, cigar sellers and tobacco industry representatives opposed the measure, as did groups that advocate for limited government.
John Dunham, an economist brought in by the Nebraska Grocery Association, said higher cigarette taxes would mean lost sales for Nebraska retailers.
Dunham, whose clients include the tobacco giant Altria, predicted that smokers would turn to other states, the Internet or Native American reservations to avoid a higher tax.
Right now, he said, Nebraska retailers are benefiting from having lower tobacco taxes than many other states.
The state’s current cigarette tax — 64 cents per pack — ranks 40th among the 50 states and the District of Columbia, according to the Campaign for Tobacco Free Kids.
Rich Marianos, a retired federal agent who is on the George Washington University faculty and consults for American Tobacco Company, warned that raising taxes could draw criminals to Nebraska looking to make money from black market cigarettes.
Gloor said the most recent increase in the cigarette tax was in 2002.
Since then, 47 states and the District of Columbia have raised their cigarette taxes. The highest state rate is $3.75 in Rhode Island. The lowest is 17 cents in Missouri. In Iowa, the cigarette tax is $1.36.
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