The following report from the Nevada Independent covers a tax proposal Keystone Corporation believes Nevada’s business community should be monitoring closely ahead of the 2027 legislative session.
By Piper Heath / The Nevada Independent
A lower smoking rate is exactly what public health advocates want from a higher cigarette tax. It is also, according to the state’s own fiscal data, the reason the tax’s revenue never holds up for long.
That tension came into view recently when the Nevada Tobacco Control and Smoke-Free Coalition asked the Joint Interim Standing Committee on Revenue to increase the cigarette tax by $1.75 per pack, pushing the rate from its current $1.80 to $3.55 — nearly doubling the tax smokers pay now. The coalition argued the hike would generate tens of millions of dollars annually while pushing more Nevadans to quit smoking.
But Michael Nakamoto, a fiscal analyst with the Legislature’s Fiscal Analysis Division, said decades of data reveal an uncomfortable irony: the two most recent cigarette tax increases, in 2003 and 2015, each produced a short-term spike in revenue, followed by a steady decline back toward where the tax revenue started.
“Essentially what that means is we’ve given back the entirety of that tax increase from 2015,” Nakamoto told the committee.
Sen. Dina Neal, the committee chair, pressed the coalition on the same point, noting that tobacco revenue funds several state programs beyond public health — including the Millennium Scholarship and the state’s general fund. “So when that revenue completely dwindles,” she asked, “what then do we use for the source of funds?”
Cigarette tax collections have fallen every year since 2023, dropping from $135.3 million to $123 million to $119.6 million last year. Collections are down another 15.2 percent so far this year compared to the same period last year.
The coalition’s proposal pairs the cigarette tax hike with a parallel increase on other tobacco products including vapes, and projects roughly $66 million in new annual revenue combined. The same model projects a 12 percent drop in youth smoking.
The retail tobacco industry warned the increase would backfire. David Spross of the National Association of Tobacco Outlets cautioned that pushing Nevada’s rate to $3.55 per pack — far above neighboring Idaho’s 57 cent rate — would widen the price gap enough to fuel smuggling, undercutting law-abiding retailers.
The vaping industry drew a sharper line. Tony Abboud of the Vapor Technology Association said his group does not oppose raising the cigarette tax itself, only applying the same rate to vapor products, arguing that taxing them at parity would push former smokers back to cigarettes and that Nevada’s vapor retailers — mostly small businesses — would bear the brunt of the increase.
The interim committee can only recommend bill drafts for the 2027 session. Any actual increase would require a two-thirds majority vote in each legislative chamber. Committee members gave no indication where they stand and are expected to decide which bill drafts to request when they reconvene in August.
Neal summed up the long-term problem plainly. “It’s a fiscal cliff,” she said. “So there has to be something that comes after it.”
Source: The Nevada Independent, July 13, 2026. Reported by Piper Heath.