Senate Finance and Taxation hears bill to raise cigarette tax, add vaping tax and direct funds to local public health

Senator Kathy Hogan, sponsor of Senate Bill 2281, told the Senate Committee on Finance and Taxation that the bill would raise the cigarette tax and create a new wholesale tax on electronic smoking products, with the additional revenue directed to the Department of Health and Human Services for local public health units and 988 suicide-prevention services.

"This is a public health bill primarily," Senator Kathy Hogan said, noting the bill would raise the state cigarette tax from $0.44 per pack to about $0.69 per pack and add an ad valorem tax on vaping products based on wholesale price.

The bill drew sharply divided testimony. Public‑health advocates and local health-unit officials told the committee that higher prices reduce youth nicotine use and that including newer nicotine products in the tax code would close loopholes in current law. Andrew Horn, coalition program director for Tobacco Free North Dakota, said the bill contains useful definitions and applauded inclusion of alternative nicotine products, but urged a larger per‑pack increase to meet CDC best practices.

"The price increase is one of the most effective interventions to reducing tobacco use," Horn said, and recommended amending the cigarette tax in the bill to a higher amount aligned with CDC guidance and neighboring states.

Opponents argued the proposal is regressive, would push sales online or to untaxed sources and would harm small retailers. Mike Rood, president of the North Dakota Petroleum Marketers Association, urged the committee to recommend a do‑not‑pass, calling the bill a "sin tax" that would disproportionately affect low‑income smokers and noting state cigarette tax revenues have fallen in recent years.

Small business owners and convenience‑store operators told the committee they already face rising operating costs and that higher taxes would accelerate online purchases and illicit sourcing of vaping products. Darius Enders, a vape‑shop owner in Fargo, said the bill would drive consumers online and could jeopardize small retail businesses. Joe Foy, general manager of Farmers Union Oil Company of Beulah and Halliday, said tobacco sales are a significant portion of in‑store revenue and urged a do‑not‑pass recommendation.

The American Cancer Society Cancer Action Network and other public‑health witnesses supported higher taxes but cautioned against the incremental approach in the bill, saying small, repeated increases allow tobacco companies to blunt the public‑health impact through coupons and price promotions. Ben Hanson of the American Cancer Society said a larger single increase (for example, about $1 per pack) has delivered stronger public‑health effects in other states.

The tax department clarified tribal arrangements: Shannon Fleisher, an associate director with the Department of Revenue, said North Dakota has an agreement with Standing Rock to collect cigarette and tobacco taxes on that reservation but does not have collection agreements with other tribes, meaning state taxes are not collected by tribal retailers on other reservations.

Committee members asked for clarifications on technical points including which products would be covered (cigars, snuff, pipes, alternative nicotine pouches and e‑liquid), the proposed ad valorem approach to vaping products, and the bill’s designated fund structure. Senator Hogan said the bill creates a designated fund to receive only the increase in revenue and that the increase would be allocated to DHHS for local public health and 988 services.

The committee heard extended public testimony in favor, opposed and neutral. At the end of the hearing Chairman Weber said the committee was not ready to act and would "lay that aside" and suggested waiting on companion activity in the House before further work.

The committee closed testimony and did not take a committee vote on SB 2281.