The Nevada Tobacco Control and Smoke-Free Coalition has petitioned the Joint Interim Standing Committee on Revenue to increase the state’s cigarette tax by $1.75 per pack. The proposal, presented during a committee meeting on Wednesday, aims to drive down smoking rates but has renewed legislative concerns over the long-term stability of state programs funded by tobacco revenue.
The proposed hike would raise the cigarette tax from $1.80 to $3.55 per pack, nearly doubling the current rate. Coalition members, including the American Cancer Society Cancer Action Network (ACS CAN) and the American Lung Association, argue the increase would generate millions in immediate revenue while helping Nevadans quit. According to CDC survey data, Nevada’s adult smoking rate has already dropped from 17.6% in 2015 – the year of the last tax increase – to 11.9% in 2024.
However, legislative fiscal analyst Michael Nakamoto warned that decades of data reveal a clear pattern: tax increases in 2003 and 2015 produced short-term revenue spikes followed by steady, permanent declines. “Essentially what that means is we’ve given back the entirety of that tax increase from 2015,” Nakamoto told the committee.
Where Nevada’s Tobacco Revenue Goes
Nevada collects tobacco revenue through a per-pack cigarette tax and an “other tobacco products” (OTP) tax, which covers vapes and smokeless tobacco. These funds flow directly into the state’s General Fund, supporting schools, Medicaid, and healthcare agencies. According to the governor’s 2025-2027 budget overview, the cigarette tax accounts for 1.7% of this fund.
Two major state programs—the Millennium Scholarship and the Fund for a Healthy Nevada—rely on the state’s share of the 1998 Tobacco Master Settlement Agreement (MSA). While not directly funded by the cigarette tax, these programs face growing deficits. Last year, MSA funds covered only $14 million of the Millennium Scholarship’s $37 million cost, requiring the state to pull the remainder from other sources, including the General Fund. A shrinking cigarette tax base leaves the state with less financial cushion to cover these shortfalls, as detailed in reports on tobacco revenue and the Millennium Scholarship.
| Tax Category | Current Rate | Proposed Rate / Recent Change | Primary Funding Destination |
|---|---|---|---|
| Cigarette Tax (per pack) | $1.80 | $3.55 (Proposed) | State General Fund (Schools, Medicaid) |
| Other Tobacco Products (OTP) | 30% of wholesale price | Parallel increase proposed for parity | State General Fund |
| Master Settlement Agreement (MSA) | Variable annual payout | No rate change (31% projected revenue drop by 2029) | Millennium Scholarship (40%), Fund for a Healthy Nevada (60%) |
Diverging Trends: Cigarettes vs. Vaping Products
Cigarette tax collections have steadily declined. According to interim committee data, collections fell from $135.3 million in 2023 to $119.6 million last year, with current-year collections down another 15.2%.
In contrast, the OTP tax has experienced fluctuations. A 2019 law expanded the OTP tax to include e-cigarettes, causing revenue to peak at $35.2 million in 2022 before dropping to $29.2 million. However, collections have rebounded by 33.8% this year, driven by a 2025 law that expanded tax collection to remote sellers and broadened the definition of tobacco-derived products.
Lee McAllister, executive director of the Nevada chapter of the American Academy of Pediatrics, noted that the cigarette tax has not been adjusted since 2015. Due to inflation, the \$1.80 rate has lost more than a quarter of its value, weakening its ability to deter price-sensitive youth from smoking.
Industry Pushback and the “Fiscal Cliff”
The tobacco and vaping industries argue the proposed tax hike will backfire. David Spross, executive director of the National Association of Tobacco Outlets, warned that raising Nevada’s rate to $3.55—well above Idaho’s 57-cent rate—will encourage illicit smuggling and hurt law-abiding local retailers.
The vapor industry also opposes “tax parity.” Tony Abboud, executive director of the Vapor Technology Association, argued that taxing vapor products at the same rate as cigarettes could drive former smokers back to combustible tobacco, harming public health and damaging small vape businesses.
Committee Chair Sen. Dina Neal (D-North Las Vegas) viewed the tax proposal as a temporary bridge rather than a permanent solution. Pointing to a projected 31% drop in MSA funds by 2029, Neal emphasized that Nevada needs a broader, long-term strategy for its declining tobacco revenue mix. “It’s a fiscal cliff,” Neal said. “So there has to be something that comes after it.”
The interim committee will decide which bill drafts to recommend for the 2027 legislative session when they reconvene in August. Any final tax increase will require a two-thirds majority vote in both legislative chambers.