LINCOLN — City of Omaha officials gave a verbal pledge to a panel of legislators Wednesday to collect no more than $35 million from its recently enacted local tax on tobacco.
“Once we meet that $35 million obligation, that will be the end of it,” said the city's lobbyist, Jack Cheloha.
But that promise is likely far from the end of the matter for an Omaha state senator and members of the Legislature's Revenue Committee.
Hard feelings about the city's passage of an occupation tax on tobacco to help fund a $370 million cancer center at the University of Nebraska Medical Center were still evident during an early evening hearing before the committee.
Passage of the 3 percent tobacco tax drew the wrath of Gov. Dave Heineman as well as Sen. Bob Krist of Omaha and other lawmakers.
They said it was improper of the university to obtain tax support from Omaha after earlier seeking and winning $50 million in funding from the state. The two officials also objected to approving the new tax without a vote of the people.
“I'm here representing people who are tired of having (new) taxes imposed without a vote,” Krist said Wednesday.
The Revenue Committee also is considering a bill to raise the state tobacco tax by 72 cents per pack. Sen. Mike Gloor of Grand Island is the author of Legislative Bill 439.
The measure would raise the tax from 64 cents to $1.36 a pack. That would equal the tobacco tax in Iowa and raise nearly $67 million in new revenue in Nebraska.
The money would be used to boost reimbursements to health care providers, double research on tobacco-caused diseases and stabilize a state fund that funds health care services.
Gloor predicted that the tobacco tax hike would cause 11,000 adults to quit smoking and prevent 20,000 teens from picking up the habit.
Krist said Omaha expects to collect $6 million a year from its tobacco tax, which amounts to about 17 cents on each pack of cigarettes. So six years of collections would be sufficient to raise $35 million. Collecting the tax beyond that, he said, would be an abuse.
The city rejected the idea. Cheloha said Wednesday it was too early to tell whether the tax, which went into effect Jan. 1, would collect $35 million in less than 10 years.
The lobbyist said Omaha had other objections to an occupation tax bill proposed by Krist. But Cheloha said there's no question that the tobacco tax is being collected only for the cancer project. Once the city collects the $35 million, the tax will end.
After the hearing, Krist said he wasn't satisfied. There's no guarantee that Cheloha's pledge will be sustained by the Omaha City Council, he said, because membership of the council could change significantly after this year's election.
The disagreement now appears headed for a study.
Krist's proposal, Legislative Bill 474, and another measure dealing with occupation taxes, LB 488, won't be debated this year, and instead will be included in a comprehensive study of the state tax system planned by the Legislature, said Sen. Galen Hadley of Kearney, who will head that study as chairman of the Revenue Committee.
Hadley said that continued questions about the proper use of occupation taxes is a relevant topic to study.
He introduced LB 488, which would prohibit cities from levying new occupation taxes on tobacco, alcohol and motor fuels, items that are already subject to state excise taxes.
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