State Sens. Paul Strommen of Sidney, Brad von Gillern of the Elkhorn area, Bob Hallstrom of Syracuse, Tony Sorrentino of the Elkhorn area and John Fredrickson of Omaha, from left. Jan. 12, 2026. (Zach Wendling/Nebraska Examiner)
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LINCOLN — Lawmakers advanced a revenue package Wednesday that is expected to bring the Nebraska Legislature more than $21 million closer to filling the projected budget deficit they’ve been working to close all session.
State senators advanced Legislative Bill 901 via a voice vote, pushing the bill to its third and final round of floor debate. The amended legislation includes a package of different bills that together would add more than $21 million to Nebraska’s general fund, according to State Sen. Brad von Gillern of the Elkhorn area, chair of the Legislature’s Revenue Committee.
Wednesday’s debate also saw the apparent death of an effort to increase Nebraska’s tobacco taxes after a similar proposal was shot down through a controversial filibuster two weeks ago.
The primary revenue generators in LB 901 include an increase to Nebraska’s tax on profits from skill game machines from about 5% to 10%. The other component would roll back sales and use tax exemptions on game birds, biochips and other recently passed tax exemption measures using the “last in, first out” philosophy lawmakers cited last year while working to fill a separate deficit.
The increased tax on skill games, initially proposed by State Sen. Ashlei Spivey of Omaha, was praised as a solid compromise following negotiations between Spivey and the Revenue Committee.
State Sen. Kathleen Kauth of Omaha, a committee member, said she thought it was wise to increase taxes on the skill game industry because not so long ago, lawmakers didn’t know how prevalent skill games would become or how profitable they would be. State Sen. Teresa Ibach of Sumner said there were 430 skill games in Nebraska in 2007, and today there are roughly 6,000.
A key value in LB 901 is its benefit to balancing Nebraska’s state budget, which still has a $125 million projected deficit that is in reality closer to $140 million. State Sen. Mike Jacobson of North Platte said the bill’s passage gives lawmakers a path to close the deficit without pulling more dollars out of Nebraska’s rainy day fund.
Budget balancing was also the intent of AM 2650 from State Sen. Jana Hughes of Seward. The amendment included multiple components:
- Increase Nebraska’s cigarette tax from 64 cents per pack to $1 per pack in 2027, then to $1.36 per pack in 2028, matching Iowa’s current rate.
- Increase taxes on vape products to 30% wholesale.
- Slow Nebraska’s phased income tax rate reductions from 4.55% currently to 4.35% in 2027, with a two-year gap before it reaches 3.99% in 2029.
- Halt the escalators to Nebraska’s property tax credit programs for two years, keeping the credits at the same amount instead of increasing each year.
Altogether, the amendment’s provisions were estimated to generate over $144 million in revenue in the next fiscal year, and an additional $280 million the year after.
The cigarette and vape tax proposals are similar to what was proposed in LB 1124, although the cigarette tax provision is scaled back. The original bill would have increased the cigarette tax by $1, going from 64 cents per pack to $1.64 per pack in one year.
The slowdown of Nebraska’s income and property tax relief measures stemmed from Hughes’ concerns about future budget challenges. While she said she is confident lawmakers can balance the budget this year, after back-to-back years of filling two separate deficits, she feels the Legislature has already “shook the cushions out” regarding spending cuts.
“I’m not a bomb thrower,” Hughes said. “I’m just trying to logically think this through.”
Hughes said she is concerned about what she’s seeing in the economy — both Nebraska’s and nationally. If the continued volatility creates projected deficits in future budgets, she’s concerned that lawmakers will look to reduce the state’s property tax credits as a way to fill the hole.
Nebraska’s two property tax credit programs use about $2.45 billion of Nebraska’s revenues in the current biennium to dole out refunds on residents’ property tax statements, with baked-in accelerators slated to increase the credits indefinitely.
Hughes said she would not support attempts to reduce property tax credits if such proposals are introduced, but she would seek to rollback business incentives instead, something she acknowledged is also popular across the state.
Hughes called AM 2650 a “responsible, reasonable” approach to managing Nebraska’s budget over the next few years. She added that this year is lawmakers’ last chance to slow the state’s income tax rates before the rate is scheduled to level off at 3.99% in 2027.
Few senators expressed support for Hughes’ amendment, and Hughes acknowledged multiple times that it likely lacked enough votes to pass. State Sen. Tony Sorrentino of the Elkhorn area said he was hesitant to jump onboard with a drastic measure that has many implications lawmakers haven’t yet considered.
State Sen. Tom Brandt of Plymouth was the only lawmaker besides Hughes to speak in support of AM 2650. He called it a commonsense measure that approached the state budget from “all three legs of the stool.”
State Sen. Mike Moser of Columbus said there were several proposed amendments that he believed would improve LB 901, but cautioned that some of them would risk siphoning votes from the underlying bill and jeopardize its chances of passing.
Hughes seemed to agree, because shortly after Moser spoke, she motioned to withdraw AM 2650.
“I hope in two or three years, I don’t look back on this day and say ‘Darn it, I feel like we should have done that,’” Hughes said.
This story is provided by States Newsroom, a nonprofit state news network and Blox Digital content partner.
