Nebraska Lawmakers Consider Major Tax Hikes on Cigarettes, Vapes and Other Nicotine Products

Key Points

• Two bills in play: LB1124 and LB1238 would raise taxes on cigarettes, vape products and other nicotine items.
• LB1124: Would increase Nebraska’s cigarette tax from $0.64 to $1.64 per pack.
• LB1238: Would replace the per-pack cigarette tax with a 30% tax on the retail dealer’s purchase price.
• Broader nicotine taxes: Would raise the tax on alternative nicotine products from 20% to 30%, and apply 30% to other tobacco products as well.
• Business impact argument: Critics warn higher taxes could hurt small vape shops, convenience stores and gas stations—especially near state borders—by driving cross-border purchases and illicit trade.

2Firsts, Feb 4, 2026

According to an Americans for Tax Reform commentary, Nebraska lawmakers are weighing two proposals that would sharply raise taxes on cigarettes, vape products, and other nicotine items—moves that could increase consumer costs and intensify pressure on small retailers statewide.

The piece outlines that LB 1124 would more than double Nebraska’s cigarette tax, lifting it from 64 cents per pack to $1.64 per pack. A second measure, LB 1238, would replace the current flat per-pack cigarette tax with a 30% tax on the retail dealer’s purchase price, increase the tax on alternative nicotine products from 20% to 30%, and apply that same 30% rate to other tobacco products.

The commentary argues these increases could squeeze small, family-owned vape shops, convenience stores, and gas stations that rely on these categories for a meaningful share of revenue. Border-area retailers, it adds, may face heightened competition from neighboring jurisdictions with lower taxes and from untaxed sources, potentially putting local jobs and businesses at risk.

It also emphasizes the regressive nature of cigarette taxes, citing figures that in Nebraska about 28% of residents earning under $25,000 smoke, compared with 8.7% of those earning $75,000 or more—meaning lower-income consumers would bear a larger share of the burden.

On revenue, the piece contends that large tax hikes often fail to meet projected targets because the legal tax base can shrink faster than expected as consumers switch to cross-border purchases, online channels, or illegal markets. It further argues that heavier taxation of vape products could weaken incentives for smokers to move to lower-risk alternatives, and criticizes LB 1124 for taxing heat-not-burn products the same as combustible cigarettes despite scientific distinctions.

The piece concludes that Americans for Tax Reform opposes the proposed increases and urges lawmakers to vote against LB 1124 and LB 1238.

Image source: Americans for Tax Reform