A legislative committee in Nebraska has put forward a comprehensive tax bill that would, among other things, impose a 30 percent sales tax on “consumable hemp” and CBD products. The proposal, which essentially aims to provide property tax relief, will now be considered by the full legislature.

On Monday, lawmakers on the Finance Committee passed bill LB 34 by a vote of 6 to 1. The tax package includes several proposals introduced during the state’s special session that Gov. Jim Pillen (R) called last month to address the property tax issue.

The bill approved by the committee would impose a 30 percent sales tax on “consumable hemp products,” defined as finished products containing hemp that contain no more than 0.3 percent THC. Hemp products made from stems or seeds – i.e. for use as fiber or as food – would not be included in the definition, nor would drugs approved by the U.S. Food and Drug Administration (FDA).

Finance Committee Chair Sen. Lou Ann Linehan (R), who has played a central role in the tax debate, first introduced the 30 percent hemp tax two weeks ago in an earlier bill she supported. A separate proposal she introduced during the regular legislative session would have taxed consumable hemp and CBD at 100 percent, a rate later reduced to 25 percent before the underlying bill fizzled out.

“The 100% tax was not practical for CBD companies in our state. They feared it would put them out of business,” Senator Anna Wishart (D), who supported previous efforts to end marijuana prohibition in the state, told Marijuana Moment in an email at the time. “In discussions with representatives of a group of CBD companies in the state, I worked with them and other senators to negotiate the tax down to 25%.”

The rate is currently 30 percent and will be reduced to the minimum in the bill.

Other politicians have now used the property tax issue as an opportunity to discuss a more comprehensive legalization of cannabis, which they believe would generate significant government revenue.

“Frankly, in our state, in the state of Nebraska, we really need to talk about refusing to open up other revenue streams,” said Senator Terrell McKinney (D) during a floor debate earlier this year. “One revenue stream we should open up to is the legalization of marijuana.”

“We have a brain drain problem,” Senator Jen Day (D) added at the time, “and we have refused to acknowledge that and address it from the other policy perspectives that have caused the brain drain problems – one of which is the fact that year after year we have chosen not to even legalize medical cannabis in the state.”

“By the end of 2022, states have reported a total of more than $15 billion in tax revenue from legal adult-use cannabis sales,” she noted.

Although Linehan is not the initiator of the latest tax revenue bill, she told local media ahead of Tuesday’s debate that she was optimistic.

“I’m confident we’ve written the bill in such a way that no one will see less and almost everyone will see more,” Linehan told reporters, according to the Nebraska Examiner. “I think we have a chance now to debate a bill.”

On Tuesday, the first of what are expected to be three rounds of debate on LB 34 took place.

The tax proposal comes at a time when Nebraska, like other states across the country, is seeing an explosion in the sale of hemp products, including intoxicating cannabinoids such as delta-8 THC. Late last year, the state’s Attorney General Mike Hilgers (R) filed suit against retailers for selling delta-8 products.

In Nebraska, cannabis is not legal for either medical or recreational use, but activists hope to change that by working to qualify two potential medical cannabis initiatives for the November ballot.

During the special session of the House this month, lawmakers also held hearings on two newly introduced bills to legalize marijuana for adults – LB 52 by Senator Justin Wayne (D) and LB 71 of McKinney.

“One of the outstanding features of LB 71 is the potential to generate significant tax revenue by legalizing marijuana and creating a well-regulated tax framework,” McKinney told his colleagues. “We can create tax relief in our state. That revenue can also go into our education system to give children the education they deserve and into businesses and community development initiatives.”

“If we come back to a special session because property taxes are so high that we have to come back for two, three weeks in the summer to figure this out and put everything on the table,” he continued, “I don’t see how we can sit here and say no and ignore the potential revenue of over $100 million.”

According to a budget note accompanying McKinney’s bill, the measure would raise $18.9 million in revenue in fiscal year 2025, increasing over time to an estimated $98.0 million in fiscal year 2028. Annual state operating expenses are expected to start at $1 million per year and rise to $2.5 million by fiscal year 2028.

Opponents of the legalization proposals included representatives from law enforcement, the state Department of Health and Human Services (DHHS), and cannabis opponents.

As for the ballot initiatives, activists submitted more than enough signatures last month to approve the measures, marking the third time in recent years that the campaign has attempted to put the reform to voters’ decisions.

A recent poll conducted by the campaign found that 70 percent of the state’s residents support the legalization of medical marijuana.

Organizers of Nebraskans for Medical Marijuana (NMM) had been petitioning for the change since July of last year, about two months after submitting two supplemental ballot proposals to the Secretary of State’s office.

The governor has already expressed his opposition to the reform efforts, saying last September that legalization is “proven to pose a danger to our children” and that medical cannabis should only be available if it is approved by the FDA.

Late last year, NMM told Marijuana Moment the governor’s argument was an “excuse,” and she said the campaign would let voters decide for themselves.

One of NMM’s previous campaigns collected enough signatures to get on the ballot in 2020, but the state Supreme Court invalidated the measure after an appeal. Supporters then lacked signatures for revised petitions in 2022, largely due to the loss of funding after one of their top donors died in a plane crash.

Nebraska state lawmakers, including campaign co-chair Wishart, have also tried to pass the reform through legislation. But the cannabis laws have repeatedly stalled in the conservative parliament.

Wishart’s medical cannabis bill was heard in the Judiciary Committee in February but failed to advance. She attributed the inaction to changes in the committee’s makeup. An earlier version of the bill ultimately stalled in the Republican-controlled House after supporters blocked a filibuster.

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Photo courtesy of Kimzy Nanney.