Senators consider cigarette tax hike to help balance budget

By Fred Knapp , Senior Reporter/Producer Nebraska Public Media

March 3, 2026, 5 p.m. ·

Sen. Tony Sorrentino in debate Tuesday (Fred Knapp/Nebraska Public Media News) — Sen. Tony Sorrentino in debate Tuesday. (Fred Knapp/Nebraska Public Media News)

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A proposed hike in cigarette taxes to help balance the state’s budget was criticized as unfair to lower-income Nebraskans in the Legislature Tuesday.

Nebraska currently taxes cigarettes at 64 cents per pack – the tenth lowest state rate in the country, and one that hasn’t increased since 2002. The proposal by Sen. Tony Sorrentino would increase that to $1.64 a pack – about in the middle among the states.

“LB1124 is not an indictment of smokers or smoking. It is a reimbursement mechanism that aligns the source of revenue with one of the state's largest budget drivers. This is a huge expense being removed from the general fund, thereby assisting the state in recovering our deficit while creating a logical cause and effect relationship,” Sorrentino said.

Supporters said since smokers disproportionately use the Medicaid system, it’s fair that they pay a higher share of the expenses.

But Sen. Dunixi Guereca said the tax would be unfair to working class Nebraskans, who are more likely to smoke. Guereca said most of the tax would be paid by people in households with incomes under $50,000.

“So we're going to tax our hard-working, working-class Nebraskans, a very pointed tax at them to give a tax break to the richest Nebraskans and largest corporations?” Guereca said.

Sen. Danielle Conrad fleshed out the criticism.

“Whether it's the construction worker in Northwest Lincoln, the farm hand out in Scottsbluff, or the veteran in Bellevue, why should my constituents have to pay for the fiscal mismanagement and recklessness of this governor and the majority of this legislature who's blown a hole in the budget with corporate giveaways?” Conrad asked.

And Sen. Jared Storm said the proposal was a nonstarter for him.

“The state of Nebraska does not have a revenue issue. We have a spending issue, and until we can figure that out and truly address that, we're going to be back next year trying to raise taxes on something else to try to plug the hole in our budget,” Storm said.

But Sen. Mike Moser said that stance was unrealistic.

“If everybody took that high moral stance as ‘We're not going to raise taxes, we're not going to raise fees,’ then we wouldn't be able to run the DMV. We wouldn't be able to run any number of fee-based state programs,” Moser said.

Opponents also questioned how the estimated $45 million a year the bill would raise would be spent. The bill would send it to a new cash fund designated to pay for Medicaid expenses that would otherwise be paid out of the state’s general fund. Critics, including Guereca, suggested that cash fund could be used to prop up other spending, like lowering property or income taxes.

“There's a lot of things in the language and how the distribution of funds is occurring that is concerning -- the setting up of a slush fund with no restrictions that can be used for God knows what. If we're serious about directing money into the health care systems, there are better ways of doing that,” he said.

The Legislature adjourned for the day before reaching a first-round vote on the bill.

Earlier Tuesday, senators reached a compromise to advance a workers’ compensation bill (LB455).

Sen. Bob Hallstrom had originally proposed keeping first accident reports for workers compensation claims confidential, to avoid the flood of letters from lawyers offering to represent workers, which he said was costing unnecessary time and expense.

Tuesday, he agreed to an amendment that would delay release by 60 days, which he called a cooling-off period to see if claims could be settled amicably, and to drop other proposed changes.

Hallstrom praised the result, while suggesting lawmakers didn’t need to talk about it as much as they did.

“We had quite a love fest to get 45 minutes to get something that was agreed upon across the board. I think of my wife scolding me frequently and telling me sometimes she thinks I speak just to hear myself talk,” Hallstrom said.

Conrad, who had opposed the bill last week, said the amendment showed the system working like it should:

“I don't want this to be extended love fest, but it is a complex issue, and I know that Sen. Hallstrom, myself, Sen. Dungan, business interests, labor interests, legal experts in this field who work on behalf of insurance companies, employers and employees have all been digging into this pretty diligently and in a detailed fashion over the long weekend,” she said.

Senators then voted 37-1 for the compromise amendment and 36-1 to give bill first round approval.