A lower smoking rate is exactly what public health advocates want from a higher cigarette tax. It's 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 on Wednesday, when the Nevada Tobacco Control and Smoke-Free Coalition — whose members include the American Cancer Society Cancer Action Network (ACS CAN), the American Lung Association and the Southern Nevada Health District — asked the Joint Interim Standing Committee on Revenue to increase the cigarette tax by $1.75 a pack. 

The increase would push the rate from its current $1.80 to $3.55 per pack, nearly doubling the tax smokers pay now. The coalition argued the hike would generate tens of millions of dollars a year while pushing more Nevadans to quit smoking, a success by their own measure. Nevada's adult smoking rate has already fallen from 17.6% in 2015, the year of the state's last cigarette tax increase, to 11.9% in 2024, according to CDC survey data.

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, but as more smokers quit, that was 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 (D-North Las Vegas), the committee chair, pressed the coalition on the same point. 

"The tobacco money that you guys want will pay for the prevention programs for youth and other things, but the tobacco money that comes into the state pays for several other programs," she said, pointing to the Fund for a Healthy Nevada, the Millennium Scholarship and the state's general fund. "So when that revenue completely dwindles … what then do we use for the source of funds?"

Jennifer Atlas, government relations director for the Cancer Action Network, said the revenue decline Nakamoto described was to be expected. 

"Every state that has enacted a similar policy and raised their taxes have seen significant revenue increase," Atlas told the committee, "so while it is diminishing, it's predictable. It's not all at once."

JoAnna Strother, senior director of advocacy for the American Lung Association, added that states typically revisit their tobacco tax rates every few years for this reason — both to keep pace with the decline and to capture new products into the tax base before too much revenue slips through.  

The interim committee can only recommend bill drafts for the 2027 session. Any actual increase would need a two-thirds majority vote in each house.

Committee members gave no indication Wednesday of where they stand. They are expected to decide which bill drafts to request when they reconvene in August.

Where the money goes

Nevada taxes tobacco two ways: a per-pack cigarette tax, and a tax on "other tobacco products" (OTP), covering vapes, smokeless tobacco and similar items. Those taxes flow into the state's general fund, the same pool that pays for schools, Medicaid and most of the state budget.

Education and Nevada's health agencies draw the largest shares. The cigarette tax itself makes up just 1.7 percent of it, per the governor's 2025-2027 budget overview.

Two other programs are often mentioned in the same breath as the cigarette tax, though neither is funded by it: the Millennium Scholarship and the Fund for a Healthy Nevada. Both draw on Nevada's share of the 1998 tobacco master settlement agreement (MSA).

Of that settlement money, 40 percent goes to the scholarship and 60 percent to the Fund for a Healthy Nevada, which funds heath care-related grants across the state. The settlement hasn't fully covered scholarship costs since 2006. Last year, settlement earnings covered $14 million of its roughly $37 million cost, with the remainder drawn from the Unclaimed Property Trust Fund, the state treasurer's office and a $13 million general fund appropriation — the same fund the cigarette and OTP taxes feed. 

So while the tax doesn't fund the scholarship directly, a shrinking tax base still leaves less cushion to help cover the settlement's growing shortfall.

The revenue picture

Cigarette tax collections have fallen every year since 2023, from $135.3 million to $123 million to $119.6 million last year. So far this year, collections are down another 15.2 percent from the same point last year.

The OTP tax has followed its own arc. A 2019 law brought e-cigarettes and vape products into the tax base, driving a spike in collections that peaked in 2022 before declining. Collections came in at $29.2 million last year, down from $35.2 million two years earlier. 

But this year's numbers show a sharp reversal, up 33.8 percent so far, tied to a 2025 law that began taxing remote sellers and broadened the definition of OTP to include items derived from tobacco. 

Nakamoto acknowledged he isn't certain the redefinition captured much new revenue. Nicotine pouches, such as Zyn, still fall outside the tax.

Lee McAllister, executive director of the Nevada chapter of the American Academy of Pediatrics, notes the cigarette tax rate hasn't moved since 2015. Adjusted for inflation, that $1.80-per-pack rate has lost more than a quarter of the deterrent power it had when lawmakers set it, a gap that matters most for young people, who research shows are two to three times more price-sensitive than adults.

The proposal

The coalition's proposal pairs the cigarette tax hike with a parallel increase on OTP, to close what advocates call a growing gap in the tax code. Together, the two increases are projected to generate roughly $66 million in new annual revenue: $51.18 million from the cigarette tax and $14.60 million from bringing OTP into parity, according to modeling by Economics for Health, in partnership with the Campaign for Tobacco-Free Kids and the ACS CAN. 

The same model projects a 12 percent drop in youth smoking, more than 11,000 adult smokers quitting, and close to 3,900 premature deaths averted, with Medicaid savings exceeding $4 million and long-term health care savings approaching $208 million.

Industry pushback

The retail side of the tobacco industry says the increase would backfire. David Spross, executive director of the National Association of Tobacco Outlets, a retailer trade group, warned that pushing Nevada's cigarette tax to $3.55 a pack — far above neighboring states such as Idaho, where the rate is 57 cents — would widen the price gap enough to fuel smuggling, undercutting law-abiding retailers.

The vaping industry drew a sharper line. Tony Abboud, executive director of the Vapor Technology Association, said his group doesn't oppose raising the cigarette tax itself, only taxing vapor products at the same rate. 

"Taxing vapor products at the same rate as cigarettes is a recycled concept that years of science has proven defies common sense and undermines public health," Abboud said, calling "tax parity" a misnomer that wrongly equates vaping with what he called "the deadliest product on the market."

Abboud argued that a shrinking price gap could push former smokers back to cigarettes, and that Nevada's vapor retailers — mostly small businesses — would bear the brunt of the increase.

Atlas (who is running for a seat on the Henderson city council) rejected that framing. 

"It's not surprising that the tobacco industry opposes policies that reduce tobacco use," she said. "Their financial interests are fundamentally at odds with public health. Decisions about Nevada's tax policy should be based on independent research and what's best for Nevada families."

McAllister dismissed both arguments in a statement to The Indy: taxing e-cigarettes at parity with cigarettes keeps teens from simply switching to a cheaper alternative, and no e-cigarette product currently carries FDA authorization as a smoking-cessation aid.

What comes next

The MSA settlement money is already stretched thin. Laura Rich, director of Nevada's Department of Human Services, which administers the Fund for a Healthy Nevada, is bracing for a 31 percent drop in that revenue by 2029, on top of a 12 percent budget cut it's already absorbed. 

In a follow-up interview, Neal said she sees the proposal less as a fix than a bridge.

"It's very much a short-term strategy," she said, pointing to the same spike-and-decline pattern Nakamoto described. 

She grouped the tax, the Millennium Scholarship and the Fund for a Healthy Nevada together as part of what she called a shrinking "tobacco mix," all of which she said need a long-term strategy the state doesn't yet have. Neal said she'll survey other states that have handled the same problem and expects a clearer direction by August.

Whatever short-term boost the coalition's proposal delivers, she said, lawmakers shouldn't mistake it for a fix.

"It's a fiscal cliff," she said. "So there has to be something that comes after it."