The Reason Foundation announced it submitted a testimony to the Nebraska Revenue Committee, stating that a cigarette tax increase would undermine fiscal stability, burden consumers, and encourage cross-border and illicit sales, while placing the heaviest burden on lower-income smokers.
Legislative Bill 1124 would add $1.00 to Nebraska’s cigarette excise tax, increasing it from $0.64 to $1.64 per pack of 20, with the higher rate set to take effect July 1, 2026. Opponents say sharply higher per-pack taxes raise out-of-pocket costs and can push purchases across state lines or into illicit channels, hurting in-state retailers while delivering unstable results.
High cigarette taxes are closely linked to smuggling incentives. A Tax Foundation analysis reported that New York, a state notorious for its high cigarette tax, was the highest net importer of smuggled cigarettes in 2011, with smuggling totaling 60.9% of the state’s total cigarette market. The report ties large tax-rate gaps to illicit flows, warning that raising rates can expand black-market supply and incentives.
The Reason Foundation notes that LB1124 is framed around youth protection but points out that Nebraska’s 2021 Youth Risk Behavior Survey puts “current use” (defined as “using in the past 30 days”) of cigarettes at 3.6% of high school students. Nebraska’s 2011 survey reported 15%, about a 76% decline in ten years. “Enforcing age-of-sale laws and education are more than sufficient to address what remains of youth smoking in Nebraska. Additional tax increases are unnecessary to address a problem that has largely been solved by existing measures.”
The organization also argues that LB1124 would be “substantial and regressive” because “smokers are disproportionately from lower-income backgrounds,” meaning higher per-pack taxes fall hardest on people “least able to afford it.” Instead of “punishing smokers with higher taxes,” the testimony urges Nebraska to prioritize “access to safer alternatives” and “evidence-based cessation support” to reduce smoking without increasing financial strain.
Reason Foundation describes itself as a nonprofit, tax-exempt organization founded in 1978 and supported by voluntary contributions and publication sales. The organization publishes policy research and commentary across multiple issue areas including consumer freedom and taxation according to its website.
