Senate committee backs nicotine-products wholesale tax after heated testimony, 6–5

A Senate committee voted 6–5 to give a bill that would impose a wholesale tax on non-cigarette nicotine products a do-pass recommendation after supporters said the measure would reduce youth uptake and opponents warned it would harm low-income consumers and small retailers.

Senator Hickey, the bill sponsor, told the committee the measure is aimed at preventing nicotine use among youth and would direct revenue to a new nicotine prevention and control fund administered by the Department of Health. "If we can get school aged individuals to not take up nicotine ... we can help people who, after they develop the addiction pathways, not move on to alcohol or other substance abuse," Hickey said.

Supporters at the hearing included the American Heart Association and the American Cancer Society Cancer Action Network. Mahesh Sita of the American Heart Association told the committee there is an "ecigarette epidemic in our schools" and urged lawmakers to support the bill. Linda Siegel of ACS CAN backed the bill’s definition changes that would capture synthetic-nicotine products.

Opponents included retail and industry groups. Art Hall, representing Native Trading Associates, said tobacco taxes are regressive and warned higher taxes would push customers to the black market. Industry representatives for Philip Morris and Altria argued the products can assist adult smokers to reduce harm and warned higher state taxes will drive online and cross-border purchases outside state taxation.

Expert testimony from Legislative Finance Committee economists noted limited price elasticity for addictive nicotine products. "A 10% increase in price will reduce consumption by about 0.5% at the population level," said LFC economist Brendan Gray; he noted the elasticity estimate is a population average and that younger users often have different sensitivities.

Bill details and fiscal effect

- The measure would impose a wholesale excise tax on products "other than cigarettes made for or containing nicotine, natural or synthetic, intended for human consumption" (the bill text as presented). It excludes FDA-regulated drug-device products used for cessation under the FDA drug/device statute.

- The sponsor said the tax is expected to raise roughly $5 to $10 million a year and that revenues would be deposited into a nicotine prevention control fund for the Department of Health, expanding prevention efforts currently funded at about $5.5 million (CDC recommends higher spending levels for effective statewide tobacco prevention).

Committee action and vote

Senator Steinborn moved a do-pass recommendation; Senator Trujillo seconded. The committee recorded a roll-call vote with the following members recorded: Brandt (no), Campos (no), Gonzales (yes), Lanier (no), Padilla (yes), Steinborn (yes), Tobiasin (no), Trujillo (yes), Woods (no), Shandoh (yes), Muñoz (yes). The motion passed 6 in favor, 5 opposed. The committee chair announced a "do pass" recommendation and assigned follow-up language subcommittees for bill drafting and constitutionality review.

What to watch next

Proponents urged further enforcement funding and undercover compliance checks to reduce illegal sales to minors. Opponents warned online sales and reservation sales could undercut the tax’s effectiveness. LFC staff recommended careful monitoring of cross-border and online transactions and flagged the bill's reliance on price as a behavior-change tool given addiction-related elasticity concerns.

The committee’s recommendation sends the bill to the full chamber for further consideration; committee testimony and the roll-call record are part of the hearing record.