Nebraska Senator Hughes proposes 40% wholesale tax on electronic nicotine delivery systems

Nebraska lawmakers are considering a significant overhaul of the tax structure for electronic nicotine delivery systems (ENDS) during a recent Revenue Committee meeting. The proposed legislation, LB 712, aims to replace the current bifurcated tax system with a flat 40% wholesale tax on vaping products, a move that supporters argue will simplify taxation and align Nebraska with practices in other states.

Senator Hughes, the bill's sponsor, highlighted that Nebraska currently lacks a comprehensive excise tax on vaping products, unlike other nicotine items. The existing system taxes smaller vaping products at a rate of 5 cents per milliliter and larger products at 10% of wholesale. Hughes emphasized that the proposed 40% tax is reasonable compared to the average wholesale tax of 56% in other states, with some states imposing rates as high as 95%.

The senator also pointed out that the new tax structure would eliminate the need for future adjustments tied to inflation, as a percentage-based tax would automatically scale with product prices. Hughes expressed concern over the current disparity in taxation between vaping products and traditional cigarettes, noting that a pack of cigarettes is taxed at 64 cents, while a comparable amount of vape liquid is taxed significantly less.

However, the proposal has faced opposition from various stakeholders, including small business owners and public health advocates. Critics argue that the steep tax increase could harm local retailers, push consumers toward unregulated markets, and ultimately undermine public health efforts aimed at reducing smoking rates. They contend that excessive taxation may drive consumers back to traditional cigarettes, which carry greater health risks.

During the meeting, committee members discussed the potential implications of the tax increase, including its impact on youth vaping rates. Some lawmakers expressed a desire to find a compromise that balances revenue generation with the sustainability of the vaping industry. The conversation highlighted the complexity of vaping regulations and the need for a nuanced approach to taxation that considers both public health and economic factors.

As the committee continues to deliberate, the outcome of LB 712 could reshape the landscape of vaping product taxation in Nebraska, with significant implications for consumers, businesses, and public health initiatives. The committee is expected to gather further testimony and data before making a final decision on the proposed tax changes.