The tobacco industry and its allies usually base their claims on studies paid for by the tobacco industry, while independent studies show that smuggled cigarettes only account for 2% to 6% of total consumption.These claims would all be employed in Nebraska by the tobacco industry and its allies in 1999 to defeat a $0.66 excise tax increase that Citizens for a Healthy Nebraska got introduced by Senator David Landis of Lincoln. Citizens for a Healthy Nebraska was successful in getting their proposed excise tax considered by the Legislature. In the 1999 session, Senator David Landis introduced LB 505, which sought to raise the excise tax on a pack of cigarettes from $0.34 to $1.00.In addition to raising the tax, LB 505 sought to establish the Tobacco Prevention, Control, and Enforcement Fund with approximately $0.14 of the $0.66 increase going to this fund. This would generate an estimated $14 million annually to fund tobacco control efforts in Nebraska, which was the CDC’s minimum recommended level of funding for tobacco control in Nebraska.The Tobacco Prevention, Control, and Enforcement Fund was to be administered by the Health and Human Services’ Health Promotion and Education Division, which was part of the Office of Preventive Health and Public Wellness.This effort was prior to the passage of LB 1436, the bill that designated $21 million over three years to a statewide tobacco control program, so if LB 505 would have been successful, it would have been responsible for funding a statewide tobacco control program. The purpose of this fund as defined in LB 505 was for “enforcement, counter-marketing, education, and outreach programs that specifically address the cause and prevention of smoking-related diseases and smoking prevention and cessation.”The intent of the large increase in the excise tax,hydroponic trays as explained by Senator Landis in his Statement of Intent was “to create an economic impediment to the purchase of cigarettes by adolescents in Nebraska. National Cancer Institute studies show that a 20% increase in the price of a pack of cigarettes should result in a 30% decrease in teenage smoking.”

For example, Brown and Williamson produced a report entitled “LB 505’s Effect on Nebraska Retailers” which detailed the tobacco industry’s key points for opposing LB 505 which seemed targeted to retailers. It even used language that makes it seem that the reasons are coming from another retailer and not Brown and Williamson. For example, the first sentence of the document was “This tax will only punish our stores and our legal consumers” and the last line was “Most of these sales and profits will simply be shifted to our neighbors who are not burdened by this tax.”In between these two lines were a litany of figures for lost sales, lost profits and lost workers that Brown and Williamson indicated would result from smokers purchasing their cigarettes from places other than Nebraska retail outlets. Nowhere in the document was the source of these figures cited.The testimony of Dennis Rasmussen, lobbyist for Philip Morris, at the Revenue Committee’s hearing on LB 505 focused on the same themes. Citing studies conducted by the industry-funded American Economics Group and Incontext, Inc.,Rasmussen’s handout to legislators contained sections entitled “Sales and Jobs Lost to Surrounding States,” “Lost Retail Sales,” “Unfair Burden,” and “An Unregulated Black Market in Cigarettes.”William Peters, the lobbyist for both Brown & Williamson and Lorillard, David Schulte for the Nebraska Association of Tobacco and Candy Distributors and Bob Skochdopole for the Smokeless Tobacco Council also testified against the tax increase. Testifying in favor of LB 505 were numerous representatives from the members of Citizens for a Healthy Nebraska, the American Association of Retired Persons , nine individuals from Loup County Public School and representatives from Creighton University and the University of Nebraska Medical Center.LB 505 was advanced out of by a vote of 5-3 but the committee added an amendment so that the tax increase would sunset after three years on December 31, 2002.After LB 505 advanced out of committee, the Americans For Tax Reform, sided with the tobacco industry.In a letter to State Senator Jim Jensen, Grover Norquist, President of the American For Tax Reform, reminded Jensen that he had signed the Americans for Tax Reform’s Taxpayer Protection Pledge. Norquist stated, “As you know, there is a proposal in the Nebraska legislature which would raise taxes on tobacco products.

Unless this tax increase is matched dollar for dollar by a tax cut, it would violate the terms of the Pledge.”The letter then urged Senator Jensen to vote against LB 505. Handwritten on the copy of this letter was a note indicating that it was to be faxed to Betsy Giles, a senior executive with Philip Morris.It is not known if similar letters were sent to other members of the Legislature. While LB 505 was on the floor of the Legislature, high level tobacco executives were monitoring its status. In the Weekly Status Report for the State Government Relations Department for R.J. Reynolds, Roger Mozingo, the Vice President for that department, informed T. J. Payne, R.J. Reynolds Senior Vice President of External Relations, that, as of March 18, LB 505 had not yet been scheduled for debate. Mozingo added, “A vote count of ‘hard votes’ was taken earlier this week and 20 no’s and 9 yes’s were counted. There are 49 members of the Nebraska legislature, which leaves 20 ‘swayable’ votes. An extensive grassroots effort is underway by the industry.”Later that month, the American Legislative Exchange Council sponsored a luncheon for state senators. ALEC is an association for state legislative members. Two of its major funding sources are Philip Morris and R.J. Reynolds.At that luncheon, Michael Flynn, Director of Legislation and Policy for ALEC repeated the tobacco industry position that passing LB 505 could produce a black market for smuggled cigarettes that was run by the mob. After telling senators that a semitrailer full of smuggled cigarettes could produce over a half of a million dollars in profit for the smuggler, he added, “That’s quite a temptation for organized crime – a cash bonanza.”Flynn cited Michigan as an example of a state which had seen an increase in cigarette smuggling as a result of increasing its excise tax. He also reiterated the tobacco industry’s stance that Nebraska would lose cigarette sales to neighboring states with lower excise taxes which would result in lower tax revenue.Citizens for a Healthy Nebraska responded to the luncheon by making sure that senators were informed that ALEC received funding from the tobacco industry.As part of this effort,vertical farming companies they disseminated ALEC literature that thanked Philip Morris and R.J. Reynolds for their “generous contributions”in sponsoring a States & Nation Policy Summit in 1998.They received some help in this effort from Senator Donald Preister who was a member of ALEC at the time but was also a strong tobacco control proponent . He noted to reporters that ALEC received money from the tobacco industry and he said he recalled an 1993 ALEC “orientation” for newly elected legislators that he attended in which cigarettes and lighters were given out to the state legislators that attended.Their efforts, however, did not prevent the bootlegging message from being ascribed some credibility. Major Gale Griess of the Nebraska State Patrol was quoted in an Associated Press article saying that if LB 505 passed, “Bootlegging will be a problem.”By March 31, LB 505 still had not come up for debate on the floor of the Legislature. In another weekly status report from Roger Mozingo to T. J. Payne, Mozingo wrote, “Grassroots efforts continue at a heavy pace. WKA has prepared economic impact books that will be delivered to many of the legislators the first of next week.”It is not known what WKA stands for but it likely refers to one the companies that produces economic studies that are paid for by the tobacco industry. At the same time, another study was released by In Context, Inc., which produces studies paid for by the tobacco industry, that predicted that if LB 505 passed then it would “drive more shoppers and jobs” to Nebraska’s neighbors.This new report that focused on Nebraska received mention in the Omaha World-Herald. It was also reported that the study was funded by Philip Morris.When asked how much Philip Morris paid for this study, William Lilley III, chairman of In Context Inc. and former economics professor at Yale University, declined to answer the question.

The tobacco industry efforts seemed to have the desired effect. When LB 505 came up for debate on the floor of the Legislature, Land is and other senators in support of an excise tax increase offered an amendment that would cut the increase more than in half, from $0.66 to $0.30.Even so, supporters of the amendment were only able to garner 24 votes, one short of the 25 needed to pass an amendment.The Legislature adjourned with no further action being taken on LB 505.The following year, in 2001, Citizens for a Healthy Nebraska again pushed for a large excise tax increase which was sponsored this time by Senator Jim Jensen . On January 17, 2001, Senator Jensen introduced LB 792, which sought to raise the state’s excise tax by $0.30.Newspaper reports dubbed LB 792 a “something-for-everyone” bill because the over $30 million that would be raised by the excise tax increase was to be given to foster care, water-quality monitoring, juvenile justice, emergency services, rural health and urban redevelopment projects in Omaha and Lincoln.It also included a $0.05 earmark for Tobacco Free Nebraska, which was already being funding at $7 million per year as part of LB 1436.This tax increase was to continue until July 1, 2008 so it would have provided funds for Tobacco Free Nebraska until FY2008 as compared to LB 1436 which only funded Tobacco Free Nebraska through FY2002.307, Befitting a bill that would have funded numerous different areas, there was a sizable turnout of individuals in favor LB 792 at its hearing before the Revenue Committee. In total, 25 people testified in favor of the bill.From the tobacco control community, five individuals comprising most of the member groups of the Citizens for a Healthy Nebraska coalition testified in favor of LB 792.Also testifying in support was Mark Welsch, President of GASP of Nebraska, and Richard Hunt, the founder of GASP of Nebraska. Numerous individuals from the tobacco industry and their allies appeared again to oppose an excise tax increase in Nebraska. Included were Walter Radcliffe, lobbyist for United States Smokeless Tobacco, Jim Moylan of the Nebraska Licensed Beverage Association , David Menke of No Frills Supermarkets and the Nebraska Grocery Industry Association, Derek Crawford, lobbyist for Philip Morris, Cara Potter of the Nebraska Retail Federation and David Schulte of the Nebraska Association of Tobacco and Candy Distributors.During the testimony before the Revenue Committee, the tobacco industry and its allies focused on themes similar to those expressed during the debate of LB 505 the previous two years. Radcliffe also criticized Senator Jensen’s strategy of providing earmarks to numerous interests in LB 792. Radcliffe stated, “It gives the money to different people in hopes that those people will be able to persuade enough senators to vote for the increase this year. I don’t think they can.”It was Holmquist and Dr. Paul Paulman of the Nebraska Medical Association that made Citizens for a Healthy Nebraska’s case for an excise tax increase before the Revenue Committee. Also testifying in favor of the bill from the tobacco control community in Nebraska was Mark Welsch of GASP of Nebraska.Many of the same names from previous years opposed LB 1149. Testifying against an excise tax increase again were Radcliffe of United States Smokeless Tobacco, Schulte of the Nebraska Association of Tobacco and Candy Distributors, Crawford from Philip Morris, Moylan of the Nebraska Licensed Beverage Association .The newcomers were Lon Alexander, a Tobacco Hut owner, Timothy Keigher of the Nebraska Petroleum Marketers Association and Bill Peters, formerly with the Tobacco Institute, and now testifying for Lorillard and Brown & Williamson. On February 28, 2002, Governor Johanns unveiled his budget which included a $0.50 excise tax increase in LB 1149, but, unlike LB 1149, the revenue <is the way I edited it correct?> from the tax increase was to go to the General Fund and not to health expenses.