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Committee releases broad tobacco-tax overhaul after competing public-health and business testimony
Summary
House Substitute 1 for HB 215 would raise cigarette and other tobacco taxes, add nicotine pouches to taxed products and increase licensing fees; public-health groups supported the bill for youth-prevention and cost savings while retailers and distributors warned of cross-border sales and illicit markets. The committee released the substitute bill.
Speaker Minor Brown presented House Substitute 1 to House Bill 215, a package of tax and licensing changes that would take effect Sept. 1, 2026. The proposal includes raising the cigarette excise tax to $3.60 per pack, adding nicotine pouches to the "other tobacco products" category and increasing that ad valorem rate to 40 percent, creating a premium-cigar tax category at 30 percent, increasing vapor-product tax to $0.10 per milliliter, raising moist snuff tax to $1.23 per ounce, and increasing wholesale and retail license fees.
Public comment reflected sharply divided views. Public-health organizations including the American Lung Association, American Cancer Society Cancer Action Network and the American Heart Association supported the measure, citing estimates included in sponsor materials that the substitute would decrease youth use by about 9.6 percent, prevent roughly 600 youth from becoming adult smokers, encourage thousands to quit, and generate long-term health-care savings. Health proponents emphasized modernizing product definitions to encompass nicotine pouches and emerging products that appeal to youth.
Retail and distribution groups, convenience store representatives and some small retailers urged the committee to oppose the substitute, warning that large tax hikes would eliminate Delaware’s retail price advantage, push sales across state lines, damage in-state businesses and potentially expand illicit markets. Industry witnesses pointed to underperformance of revenue projections after past tax increases in neighboring states and urged caution.
PMI-affiliated scientific engagement head Dr. Brian Urkelow (virtual) argued nicotine pouches are FDA-authorized risk-reduction products for adults and cautioned that excessive taxation could discourage use of reduced-risk products; public-health witnesses disputed that characterizing nicotine pouches as reduced risk for cessation was dispositive and said including noncombustible products in the tax structure reduces youth-use loopholes.
After extended public comment and committee discussion about pricing, regressivity and illicit-market risk, Vice chair Ocinski moved to release HS 1 for HB 215. The motion passed by roll-call with Chair Harris, Vice chair Kozinski and Speaker Minor Brown voting yes and Representatives Dukes and Spiegelman voting no. The committee adjourned.
All numeric estimates and modeling cited by supporters and opponents were presented to the committee by witnesses; the committee record includes those statements and submitted written comments for the public record.