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Nebraska’s unicameral legislature spent hours on Wednesday evening debating a proposed tax bill containing a provision that would set a 100 percent tax rate on CBD and consumable hemp products—part of a broader package of sales tax changes meant to bring in more money to state coffers in an effort to offset property taxes.
While the bill’s sponsor now says in response to criticism that the 100 percent tax rate is not set in stone, no alternative came up during the lengthy floor discussion.
Other lawmakers did push back against the hemp and CBD tax at various points in the floor debate, with some saying the state should instead legalize and regulate marijuana as an alternative way to raise revenue.
“I looked around. I saw some statistics on other states—neighboring states—and it’s a lot lower. Definitely not 100 percent,” said Sen. Terrell McKinney (D). “So we’re not going to be comparable to our neighboring states if we tax it at 100 percent.”
“Honestly speaking, what we really need to have a conversation about in our state, in the state of Nebraska, is our refusal to open ourselves up to other revenue streams,” he continued. “One revenue stream that we should open ourselves up to is the legalization of marijuana.”
He noted that Colorado, for example, made more than $280 million in marijuana tax revenue during the last fiscal year.
Neither medical nor adult-use cannabis are legal in Nebraska, though activists are working to change that this year.
“We have a brain-drain issue,” said Sen. Jen Day (D), “and we refused to recognize that and address it from the other policy perspectives that caused the issues with brain drain—one of those being the fact that we have chosen year after year after year not to legalize even medical cannabis in the state.”
“Through the end of 2022, states have reported a combined total of more than $15 billion in tax revenue from legal adult-use cannabis sales,” she noted.
Sponsored by Sen. Lou Ann Linehan (R), the bill’s new language says the the state’s sales tax rate “shall be one hundred percent on consumable hemp products.” The tax would not apply to Food and Drug Administration (FDA)-approved CBD products such as the pharmaceutical Epidiolex, nor would it apply to hemp dietary or fiber products.
An excerpt of LB388 as amended
This week, however, Linehan told local media that the 100 percent hemp tax proposal was just a starting point for negotiations, though she did not mention any adjustments during floor debate on Wednesday.
“Are we going to keep it 100 percent? No, we’re not,” said the senator, according to ABC affiliate KLKN. “I’ve already had one of our members tell me that, you know, elderly people like lotions and creams, and it helps with pain. So like I said, we just have to look with it.”
The steep tax hike is one of a number of changes in the sweeping 62-page striking amendment that Linehan formally filed this week. It was first reported by local media last week, when the Revenue Committee advanced the underlying measure, LB 388, on a 7–0 vote, but its actual language wasn’t publicly available until Tuesday.
Advocates reacted with shock to the proposed 100 percent tax rate on hemp products.
After last week’s committee vote, for example, Adam Morfeld, a former Nebraska state senator who now co-chairs the advocacy group Nebraskans for Medical Marijuana, posted to social media: “The Legislature is going to tax hemp and CBD at 100 percent!??”
Gov. Jim Pillen (R), meanwhile, supports the tax legislation, saying it will provide “transformative property tax relief” and “will make a tremendous difference for families, farmers and ranchers, and small businesses.”
Self-described “conservative Republican” Sen. Julie Slama, however, said after the committee vote that she’s “100% opposed” to the bill, claiming the overall proposal would be largest tax increase in Nebraska’s history.
Wednesday’s floor debate focused largely on how lawmakers wanted to balance sources of state revenue. Residents, many said, have complained that property taxes are too high, and proponents of the bill argued that raising sales taxes would prevent further state reliance on property taxes to fund schools. Opponents, however, criticized the bill’s overall increase in taxes, with some Democrats noting that sales taxes in particular would hit poorer Nebraskans hardest.
Some lawmakers also lamented that the complex measure’s many provisions seemed to come out of nowhere, although sponsor Linehan and others said the details were taken from other bills that lawmakers had introduced and debated. The hemp and CBD tax, for instance, ostensibly came out of LB 1341, introduced in January by Sen. Justin Wayne (D) and apparently never acted on by lawmakers.
That bill as introduced indeed would have increased taxes on consumable hemp, but only to 7.5 percent. LB 388, by contrast, would set a tax rate more than 13 times that.
Asked about the conflicting rates, Linehan’s office referred the question to Charles Hamilton, legal counsel for the Revenue Committee, which approved the current tax package. He told Marijuana Moment the procedural move to increase the proposed hemp tax rate from the other bill’s lower rate was legitimate.
“A rate change would not be a change that would require a new hearing, even a substantial increase like this,” he said in an email, “as the key factor for the hearing would be the taxation of the item. While portions of certain bills are included in the package, it isn’t uncommon to have a change like that made when a bill is included in a package like this.”
The legislature adjourned just after 7:30 p.m., having taken no formal action on the proposal. Lawmakers are expected to return to the matter next week following Linehan’s request for a pause on the bill until Tuesday or later.
The proposal comes as the state, like many others across the country, witnesses an explosion of hemp-derived products, including intoxicating cannabinoids such as delta-8 THC. Late last year, the state’s attorney general, Mike Hilgers (R), filed suit against retailers in the state over their sale of delta-8 products.
Meanwhile, activists are hoping to qualify two medical cannabis initiatives for November’s ballot.
A recent poll by the campaign found 70 percent support in the state for legalizing medical marijuana.
Organizers at Nebraskans for Medical Marijuana (NMM) have been petitioning for the change since July, about two months after turning in a pair of complementary ballot proposals to the secretary of state’s office.
The governor has already voiced opposition to the reform effort, saying in September that legalization “poses demonstrated harms to our children,” and that medical cannabis should only be accessible if its approved by FDA.
Late last year, NMM told Marijuana Moment that the governor’s argument was a “cop out,” and she says the campaign will let voters decide for themselves.
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One of NMM’s earlier campaigns gathered enough signatures for ballot placement in 2020, but the measure was invalidated by the state Supreme Court following a single-subject challenge. Supporters then came up short on signatures for revised petitions in 2022 due in large part to the loss of funding after one of their key donors died in a plane crash.
Nebraska lawmakers, including campaign co-chair Sen. Anna Wishart (D), have also attempted to enact the reform legislatively, but cannabis bills have consistently stalled out in the conservative legislature.
Wishart’s medical cannabis bill received a hearing in the unicameral Judiciary Committee in February, but it did not advance. She attributed the inaction to changes in committee membership. An earlier version of the measure ultimately stalled out in the GOP-controlled legislature amid a filibuster that supporters could not overcome.
Photo courtesy of Brendan Cleak.
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